Capital market set to support national goals

Focus on stable growth, deepened reform will help attract funds, enhance firms

China's capital market will position itself more precisely and the quality of listed companies will improve further in order to contribute to the national goals of stable growth and continued reform and opening-up, experts said on Wednesday.

Delivering a work report, Yi Huiman, chairman of the China Securities Regulatory Commission, said on Monday that focus on stability amid ongoing reform and opening-up should help bring in more medium to long-term capital to the market.

Complete adoption of the registration-based IPO mechanism will mark this year's capital market reform, the work report said.

The Chinese capital market should be better integrated with the country's major development strategies so that it can find the right positioning and be a growth engine, said Dong Dengxin, director of the Finance and Securities Institute, which is part of the Wuhan University of Science and Technology.

Continuous efforts should be made to build a virtuous cycle involving technology, capital and industry. More capital should be directed to technological innovation projects, the manufacturing sector and small and medium-sized enterprises, Dong said.

On the other hand, the STAR Market at the Shanghai Stock Exchange should stick to the rule of serving "hard technology" companies. ChiNext in Shenzhen, Guangdong province should advance its progress while more efforts should be made to facilitate the maturing of the newly launched Beijing Stock Exchange, which is aiming to nurture technologically advanced SMEs, he said.

It is by adhering to such precise positioning that the Chinese capital market can better play its expected role, said Pan Helin, executive director of the Digital Economy Academy, which is part of the Zhongnan University of Economics and Law.

The development of private equity and venture capital firms should be further regulated. Trials of the regional equity market mechanism and businesses thereof should be expanded, Pan said.

Reiterated by the CSRC in the recent meeting, improving public companies' quality has been frequently stressed by the regulators over the past few years.

As explained by Sun Jinju, research director at Kaiyuan Securities, regulators will continue to place higher requirements on intermediaries and help sponsors to build a better understanding of the registration-based IPO mechanism. In this way, public companies' compliance issues will be largely reduced and their quality improved.

Optimization of the delisting process will also help improve the overall quality of A-share companies, said Tian Lihui, director of the Institute of Finance and Development at Nankai University.

Ever since the new delisting rules were implemented at the beginning of 2021, the reasons for delistings have multiplied. For instance, last year, 28 A-share companies delisted for reasons like financing and trading problems and restructuring. As the delisting process will be further normalized and channels further expanded, low-quality companies will likely get filtered out, thus ensuring only high-quality companies remain in the A-share market, Tian said.

The Chinese capital market has already helped China to attain the goal of high-quality growth last year in terms of both quality and quantity. According to the CSRC, total financing from stocks and bonds exceeded 10 trillion yuan ($1.6 trillion) last year, providing strong support to the real economy.

More than 480 companies made their IPOs on the Shanghai and Shenzhen bourses last year, up 22 percent from a year earlier. Another 546 A-share companies completed refinancing last year. The proceeds from IPOs and refinancing totaled 1.5 trillion yuan, said the CSRC.

The infrastructure real estate investment trusts were launched in late June. Private equity firms invested more than 8 trillion yuan in unlisted firms last year, according to the country's top securities watchdog.

This suggests the prospect of healthy startups and small businesses getting listed in a high-quality capital market in the future is encouraging funding for such unlisted enterprises, as early investors will hope for profitable post-IPO exits, analysts said.