China’s regulator makes capital market funding a top priority as it looks to bolster economy

Expansion of direct financing and introduction of registration-based system for all IPOs tops the CSRC’s agenda in the five-year plan, says Yi Huiman

Policymakers want to reduce the reliance on financing from banks, with more tech companies being encouraged to go public amid frayed US-China ties

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Yi Huiman, the head of China Securities Regulatory Commission, says expanding direct financing will deepen the capital market reform. Photo: Simon Song

Published: 4:30pm, 1 Dec 2020Updated: 9:28pm, 1 Dec 2020

China has made direct financing a top priority of the stock market regulator as part of its five-year plan, as the nation turns to the capital market to fund companies that will help its transition to a more technology and consumption-based economy.

Expansion of direct financing and extending the registration-based system to all initial public offerings (IPO) top the six major tasks outlined by the China Securities Regulatory Commission (CSRC), Yi Huiman, the top securities regulator, wrote in an article in a book on China’s 14th five-year plan published by the government. The coming five-year plan runs from 2021 to 2025.

Yi said the goal can be achieved because of China’s growth potential, improving economic fundamentals, strong demand for wealth management and rising appeal of the stock market to international investors.

While China’s stock market is the world’s second largest with a combined capitalisation of US$10.4 trillion, the size is only a quarter of the US market. Policymakers want to reduce the reliance on financing from banks, with more tech companies being encouraged to go public amid frayed ties between Beijing and Washington.

The Star Market has become the preferred fundraising venue for new economy Chinese companies. Photo: Reuters

“Expanding direct financing is of great significance to deepen the financial supply-side reform and achieve more efficient and sustainable development,” Yi wrote in the article.