China’s top securities regulator has pledged to speed up the approvals of initial public offerings (IPOs), as the government seeks to attract capital and boost domestic growth.
Buoyed by the capital market’s recovery from a 2015 rout, the China Securities Regulatory Commission (CSRC) had yesterday indicated it would loosen its grip on the nation’s stock markets.
CSRC decides which companies offer shares and when, as well as setting guidelines for the number of shares and their price — all of which are determined by the market in other countries.
Regulators responded to the equities rout in the summer of 2015 by freezing new IPOs to stabilise stock prices, but CSRC chairman Liu Shiyu vowed to end this practice and introduce “new progress and breakthroughs''.
More than 600 companies seeking to list in the market have struggled with long wait times, followed by seemingly arbitrary approvals.
Liu said faster approvals, particularly for companies in poverty-stricken counties, will attract new capital and boost investor confidence.
“Liu seems to be the first CSRC chief to publicly denounce the practice of shutting down the IPO market whenever there is a crisis,” Dong Dengxin, a finance professor at Wuhan University of Science and Technology, told the official Xinhua news agency.
While the regulator signalled willingness to allow the market to play a larger role in share sales, it has also cracked down on illegal activities by “barbarians“.
Mainland Chinese stock exchanges have an unusually high proportion of non-professional investors and have been compared to “casinos”, with insider trading and dramatic swings in share prices seemingly unconnected to underlying business prospects.
“There is only a half-step distance between being a financial mogul and a financial crocodile,” Liu said.
Li Chao, CSRC’s deputy head, said closer supervision — in the form of compliance risk management and standardised banking businesses — will help prevent a repeat of the stock market turbulence of 2015.
Following a slump that saw the Shanghai stock index tumble nearly 40 per cent in a little more than two months — after peaking in mid-June that year — several investment executives were investigated on suspicion of insider trading.