The newly issued policy paper on the development of China's capital market has provided opportunities for further boosting the country's financial sectors, experts said Tuesday.

Li Qingyuan, an official with the China Securities Regulatory Commission (CSRC), called the focus on the development of the capital market an "urgent need" to prop up China's economic growth. Finance is the key of modern economy and the capital market plays a vital role in various financial sectors, Li explained.

China's State Council announced its decision in a lengthy document published on Sunday, outlining the guiding principles and tasks for promoting the capital market and plans to improve related policies.

In its nine-point strategy, China's central government has called on regional governments for coordinated efforts to prevent and control market risks when formulating policies involving the capital market, so as to create a sound environment and conditions for the stable development of the market.

Li said that financial resources would be better utilized in a country with a fully-fledged capital market, which would also serve to enhance the country's economic competitiveness.

Despite more than 20 years' effort to restructure the national economy, China's capital market size was only 4.2 trillion yuan (513 billion US dollars) by the end of 2003.

The liquidity of the market is low, and about two-thirds of the shares of listed companies are government-owned and non-tradable at the stock bourses.

Wu Xiaoqiu, a financial research fellow of the Renmin University of China, predicted that the construction of China's capital market would be a key project during the future reform of the country's financial system.

The policy paper has further addressed the fundamental function of capital market in the future national resource distributions, Wu added, forecasting that the measures designed to prevent and control market risks and protect investor's interests in the paper would facilitate to maintain market stability and development and further boost investor's market confidence.

China's two stock markets -- located in Shanghai and Shenzhen -- surged Monday on the State Council's call for further developing the capital market.
Analysts believed that the surge heralds a turning point for the market, and an improved capital market will ensure the long-term steady development of the national economy.

(Xinhua News Agency February 4, 2004)