The State Council has recently issued the Several Opinions on Strengthening Regulation, Preventing Risks, and Promoting the High-Quality Development of the Capital Market (hereinafter referred to as the “New Guiding Document”), which is another capital market guiding document issued by the State Council following the two guiding documents in 2004 and 2014.

When interviewed by Wen Wei Po, Professor Ruan Qingsong from the Department of Economics and Finance, Tongji SEM stated that the New Guiding Document is a thorough and detailed plan for developing the capital market that aims to address long-standing issues that have built up in the market. It can also help build a long-term healthy capital market, boost investor confidence, and consolidate the goal of strengthening China’s finances. The published original text is as follows.

When interviewed by Wen Wei Po, Professor Ruan Qingsong from Tongji SEM stated that previous capital market guiding documents had provided precise instructions for solving the market’s development issues. In contrast, the New Guiding Document lays out a thorough and detailed plan for developing the capital market, highlighting measures to improve the caliber of listed companies, fortifying full-chain regulation, stepping up coordinated efforts to crack down on illegal and criminal activities involving securities and futures, fully reflecting the goal-oriented and problem-oriented approaches, paying more attention to marketization, the rule of law, and internationalization, and striving to facilitate the resolution of enduring issues that have built up over time in the capital market. All these can help build a long-term healthy capital market, boost investor confidence, and consolidate the goal of strengthening China’s finances.

Creating a fair and efficient market environment

According to Ruan Qingsong, the New Guiding Document emphasizes the policy mainline of “strengthening regulation, preventing risks, and promoting high-quality development,” concentrates on building a safe, standardized, transparent, open, vibrant, and resilient capital market, and seeks to create a fair and efficient market environment.

The New Guiding Document proposes a series of phased development goals for the capital market in the next five years, by 2035, and by the middle of this century. It also outlines a development blueprint for the capital market based on aspects of investor protection, the caliber of listed companies, the development of industry institutions, regulatory capabilities, and the establishment of governance systems. Ruan Qingsong claims that this reaffirms the importance of China’s capital market and will enhance its competitiveness and appeal and provide strong support for the advancement of China’s finances and the country’s modernization as a whole. “The government, regulators, and market participants should work hard together to ensure the efficient and effective implementation of the policies and encourage higher-quality development of the capital market.”

The New Guiding Document places the effective protection of investors’ legitimate rights and interests, particularly those of small and medium-sized investors, in an important position. Tang Zhehui, managing partner for audits, Hard Technology Industry Center, EY Greater China, also mentioned that the New Guiding Document highlights the “people-oriented” nature and emphasizes the concept of practicing finance for the people. After more than 30 years of development, China’s capital market has grown to be an important global market with a significant number of individual investors. The respect for investors and the protection of their interests are also important manifestations of the people-oriented nature of the capital market.

Increasing opportunities for residents to earn money from their properties

“In addition to effectively serving people’s expanding needs for wealth management, we should safeguard investors’ interests, particularly those of small and medium-sized investors,” said Tang. The New Guiding Document outlines the capital market’s long-term development goals, including giving residents more opportunities to earn money from their properties, encouraging the high-level flow of technology, industry, and capital, and raising the share of direct financing for Chinese enterprises. “For example, the New Guiding Document incorporates algorithmic trading into the reasonable and lawful regulatory system and strictly prohibits high-frequency trading. These measures can improve market transparency, lessen trading rigging and unfair competition, and assist investors in making better trading decisions. They also demonstrate the document’s consideration of the fact that a sizable portion of China’s capital market is made up of small and medium-sized investors.”