Network of capital markets seen boosting efficiency

The new guideline on setting up a unified capital market in China can pave the way for sustained and high-quality development amid various uncertainties, experts said on Monday.

On Sunday, the Communist Party of China Central Committee and the State Council, China's Cabinet, jointly released a guideline that underlined quick establishment of a unified domestic market that is highly efficient, rules-based, open and fair in terms of competition.

The guideline further stated that the registration of movable properties and rights should be unified, while financing based on movable properties should be developed under related laws. More emphasis should be laid on the construction of key financial infrastructure and their unified supervision. Entry management should be optimized and supervision standards unified.

Systematic business innovations should be undertaken at regional equity markets that are under safe and regulated operation, and armed with stronger risk management capabilities. There should be more cooperation between regional equity markets and national securities markets, the guideline stated.

Fu Lichun, founding partner of Beijing-based YTI Capital, said the regional equity markets are quite scattered at present with companies from various industries listed on them. While much work is required to build systematic and close ties with national securities markets, these regional markets can be first connected to the National Equities Exchange and Quotations.

The guideline said connectivity infrastructure in the bond market should be promoted to facilitate the free flow of key elements. Finance should play a bigger role in the supply chain so that more financial products can be provided to market entities throughout the circulation links.

A unified capital market, which includes unified mechanisms and rules, will optimize the supply side, said Pan Helin, co-director of the Digital Economy and Financial Innovation Research Center at Zhejiang University's International Business School. There will be no repetitive setting of supervision mechanisms or government departments. Rules will be reduced and the financing cost will thus be lowered for market entities, he said.

It can be inferred from the guideline that the nation will attach much importance to better links between the domestic and international capital markets, with the connectivity infrastructure in the bond market as a role model, said Pan.

In this way, a systematic environment will be created where Chinese companies can better tap into the overseas markets while more foreign capital will be introduced. A prevention system will be thus built to fend off any possible risks, he said.

Yang Delong, chief economist at First Seafront Fund, said the new guideline shows the nation's dedication to deepening reform and opening-up, and promoting efficiency in using various resources. The purpose of the guideline is to realize sustainable and high-quality development, especially when the country's economy is facing more uncertainties, he said.

The guideline reiterated that the bottom line should be consolidated to guard against systemic financial risks. While emphasizing that finance should serve the real economy, the guideline stated both green light and red light mechanisms should be set up to prevent the disorderly expansion of capital.

Lin Rongxiong, the chief strategist of Essence Securities, said a mid- to long-term perspective can help in understanding such measures so that rational interpretations can be made. All the economic activities this year should be centered on stabilizing economic growth, market expectations, preventing and defusing systemic risks, he said.