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Christine Chan

China has cut red tape in its securities industry by scrapping 32 administrative procedures deemed 'outdated and tedious' by market participants.

The China Securities Regulatory Commission (CSRC) gave details of the rule changes on Christmas Eve.

They include:

The scrapping of the limit on domestic brokerages allowed to trade B shares.

The removal of initial licensing restrictions on sponsors of new share issues.

The scrapping of the initial licensing process for foreign securities firms setting up China representative offices.

The removal of the licensing requirement for foreign law firms assisting mainland firms to seek overseas listings.

The axing of official vetting of chief representatives of foreign securities firms.

The changes will streamline the approval process that securities firms must go through to qualify or apply for listing sponsorship, stock broking and underwriting corporate bonds. Their main impact will be on domestic companies, but 70 or so foreign firms will also be affected.

As part of the changes, licensing approval by the CSRC will be lifted on domestic law firms involved in securities-related law. The changes will be followed by second and third batches of similar removal of controls.

Yao Xinmin, a Shanghai-based analyst for Shanghai Finance Securities, said yesterday the antiquated market practices had been unable to cope with the fast-changing market.

'In reality, some of these rules have not been properly observed,' he said.

Previously, it could take months for a securities company to gain approval to open a sub-branch.

'Say, you submit an application document to the CSRC's institutions department its officials will examine the information and then the departmental chief before the document can go before a vice-chairman of the CSRC who is responsible for the institution business,' Mr Yao said.

In future, that process will be scrapped.

Also removed is the limit on mainland securities firms qualified to carry out B-share broking operations. Previously, only the larger firms were allowed to engage in such business.

The changes mark a significant shift in the role of market watchdog CSRC.

Chairman Zhou Xiaochuan said the 'deregulation' was aimed at removing unnecessary curbs on the market and passing on the role of the regulator to industry associations.

This is particularly important in the face of the manpower needed for the fast-growing mainland securities market.

The move is a key step in China aligning its securities practices closer to international markets, as foreigners are given improved market access following China's World Trade Organisation entry.

The Qualified Foreign Institutional Investors (QFII) scheme is an example of a growing foreign presence.

'The move may be related to QFII. China promised after its WTO entry it will make more market openings, as with those made by the State Development and Planning Commission,' Mr Yao said.

'This is a logical development in the sector,' Gui Haomin, assistant president of Shenyin & Wanguo Securities Research Institute, said yesterday.

'In the past, there have been too many curbs on the sector. This is something the market wanted,' Mr Gui said.

Graphic: cut26gbz



CSRC scraps outdated rules