34 BEIJING REVIEW MARCH 26, 2020 http://www.bjreview.com
BUSINESS
A
fter four rounds of review and delib-
erations starting in 2015, the long-
awaited revised Securities Law of
the People’s Republic of China Ķ nally took
effect on March 1. It marks a key moment
for China on further liberalizing its capital
market and improving the market environ-
ment to enhance market appeal and better
serve the real economy.
The new law stipulates regulations
for securities issuance and trading, the
takeover of listed companies, information
disclosure and protection of investors. The
major revisions include expansion of the
registration-based initial public offering
(IPO) system which streamlines the ap-
proval procedures for companies to float
shares in mainland stock markets, stricter
reTuirements on information disclosure,
and tougher penalties for illegal and un-
fair market practices. It also outlines rules
to improve the delisting system in the
securities markets and encourage the de-
velopment of investment institutions to
make the A-share market sounder.
“The revised law shows China’s efforts
to develop a more market-oriented and
rule-based capital market, which can ac-
celerate its implementation of reforms and
boost investors’ confidence,” Wang Yang,
a finance researcher at the Development
Research Center of the State Council, told
China Economic Times.
Remarkable changes
Although China has taken consistent steps
to improve the capital market in recent
years, major problems such as market
violations still remain. Xu Hongcai, Deputy
Director of the Economic Policy Commission,
China Association of Policy Science, told
Beijing Review that the capital market had
unsophisticated systems, insufĶ cient punish-
ment for law violations and high costs for
individuals to litigate, which are expected to
be addressed as the new law takes effect.
China is shifting from an approval-based
IPO system to a registration-based one.
Under the current IPO system, new shares of
the A-share market traded on the Shanghai
and Shenzhen stock exchanges are sub-
ject to the approval of the China Securities
Regulatory Commission (CSRC). To inject
impetus into the capital market, the law has
expanded the registration-based IPO system,
which has been piloted on the Shanghai
Stock Exchange’s sci-tech innovation board
since July of last year. ChiNext, China’s
NASDAQ-style board in the Shenzhen
Stock Exchange, is expected to see its first
registration-based IPO system later this year,
according to a circular released by the State
Council on February 29.
The measures for expanding the sys-
tem include lowering the reTuirements for
issuing shares by focusing on operational
sustainability instead of sustained profit-
ability, canceling the Issuance Examination
Commission-based system to make the
process easier, and improving information
disclosure reTuirements.
“The registration-based system will im-
prove the efficiency of IPO application and
reduce the waiting time for listing candi-
dates, allowing the market to play a key role
in the pricing and pace of IPOs and reducing
administrative controls on trading in the
A-share market,” Dong Dengxin, Director of
the Finance and Securities Institute at Wuhan
University of Science and Technology, told
Beijing Review, adding that the measures will
make the capital market more inclusive for
companies with different business modes
and beneĶ t investors in the long term.
The new registration-based bond issu-
ance rule is expected to ease the Ķ nancing
strain of domestic Ķ rms. According to China
Securities Journal, 23 companies had reg-
istered at stock exchanges as of March 10,
which is expected to raise 191 billion yuan
(27.44 billion).
Yan Xiang, an analyst with Shenzhen-
based Guosen Securities, told ThePaper.cn
that the streamlined and adjusted proce-
dures of securities issuance under the law
will ease a large number of innovation-ori-
ented tech enterprises’ listing, allowing them
to contribute to China’s economic growth.
The CSRC recently agreed on the reg-
istration of the IPO of RocKontrol (Beijing)Industry Co., a hi-tech company focusing on
the Internet of Things on the sci-tech board,
making it the Ķ rst company to gain permis-
sion this year.
In addition, the new system can improve
the competitiveness of listed companies and
promote the capital market to better serve
the real economy, Liu Junhai, Director of the
Business Law Center at Renmin University of
China, told China Securities Journal.
According to Xu, the registration-based
IPO system centers on information disclo-
sure. The new law highlights how regulators
have shifted from vetting listed candidates to
ensuring full disclosure of information, which
calls for more prudent investment decisions.
To enhance protection of inves-
tors’ rights and interests, the law has also
improved penalties for illegal practices
including confiscating illegal proceeds and
imposing tougher administrative punish-
ments for irregularities. It has pledged to
further protect investors, especially small
and individual ones, encourage small and in-
dividual investors to Ķ le class action lawsuits
and seek compensation in civil litigation.
It has toughened punishment for com-
panies and individuals engaging in illegal
activities such as Ķ nancial fraud, insider trad-
ing and market manipulation. Compared to
the original cap of 600,000 yuan (86,375),
the revised law has raised the maximum
penalties on intermediaries and professional
services Ķ rms involved in fraudulent IPOs to
20 million yuan (2.8 million).
“The provision can serve as a deter-
rent since it makes market violations more
costly,” Ren Yuan, a partner at Shanghai-
based AllBright Law OfĶ ce, told Xinhua News
Agency.More mature
As the revised Securities Law vows to expand
the application of the registration-based IPO
system to facilitate the entry of Ķ rms into the
A-share market, it also focuses on improving
the delisting system and boosting invest-
ment institutions to become more investor-
friendly and make the capital market more
mature.Safe and Secure
China revises its securities law to boost the domestic caSital market
By Li Xiaoyang