Plenum plans signal looser state hold over IPOs
The central government may reduce the influence of the state on stock markets as part of its reform agenda, including by making it easier for companies to list their stocks and making management of state-owned firms more accountable to shareholders.
Detailed plans released on Friday included a pledge to "push forward stock issuance registration system reform" - a term previously used to refer to the listing process. An early test of the leadership's commitment to reform will be whether it lifts a year-long suspension of new listings in Shanghai and Shenzhen.
While the stated reason for the de facto ban was to clean up fraud by forcing underwriters to review the accuracy of IPO applications, it was widely understood to be an effort to prop up the chronically weak stock market by restricting new shares. Lifting the suspension would be a signal that policymakers are willing to cede more control to markets.
The government also wants to encourage increased equity financing, which would help wean mainland firms off their overdependence on bank loans for funding.
Corporate debt on the mainland has exploded since the global financial crisis, and Fitch estimated that the economy-wide debt-to-GDP ratio would reach around 218 per cent of the gross domestic product by the end of this year, up 87 percentage points since 2008.
In July, the International Monetary Fund warned similarly rapid debt run-ups have been associated with financial crises in other countries.