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China Securities Regulatory Commission (CSRC) Chairman Zhou Xiaochuan said yesterday his commission is redefining the role of the stock market's top regulatory body and considering giving some of its power to the market.
Over the years, Zhou said the CSRC and securities firms have assumed some of the responsibilities of intermediaries and coordinating industry associations, which were absent in the early part of the market's short 10-year history.
The situation was understandable in the early days, he said, but a lack of checks and balances as well as cooperation among various market participants increasingly threatens to erode the role of the capital market in allocating resources.
"With the market growing, this distortion will become an impediment to the market's growth and is not conducive to boosting confidence," Zhou told The China Conference: the Year of Capital, a seminar organized by the Euromoney Conferences, a division of Euromoney Institutional Investor PLC.
The CSRC recently renounced 32 administrative approval rights in a broad deregulatory effort led by the State Council, and Zhou said the commission plans to withdraw further.
"Shortly we'll be considering scrapping a second set of administrative approval rights. And it will be a bigger move," he said.
The essence of such endeavours, Zhou said, is to shift part of the CSRC's role - as much as is manageable by market forces - to the market.
A complete capital market consists of issuers and investors, intermediaries such as accounting and law firms, as well as exchanges and industry associations, each playing their specialized role, he said.
The CSRC will function only as a regulator that circumscribes what is forbidden, instead of an all-around player that defines what is allowed.
Still, Zhou said the government should retain the right to act in the case of emergency, citing market-rescue efforts made by the Hong Kong Special Administrative Region's government during the Asian financial crisis.
"Under urgent circumstances, special treatment (for the government's role) should be allowed, but it should be separated from the regular role," he said.
But Zhou acknowledged that such urgencies are difficult to define and hardly predictable, and therefore require decisive action and some risk taking.
The chairman stressed that his commission does not represent the State's interests in listed State-owned companies, and said that "various ways" are being studied to help companies with different ownership structures access the capital market.
Zhou also endorsed the government's gradual approach to reform of the economy and development of the capital market over methods copied from developed nations which often turn out to be too much of a shock to a developing economy.
"The reality shows this (gradual) method of reform, overall, has been more effective," he said.
(China Daily December 6, 2002)
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