Stock market reform should continue

The State Council’s statement on the securities market, released on Friday, has been taken as a long-awaited strong shot in the arm of China’s lackluster stock market. The domestic A-share market has opened higher in morning trading and surged by 2.1 percent on Monday.

The statement pledged to push forward a broad range of capital market reforms, such as strengthening of information disclosure in the process of initial public offering and implementation of the de-listing arrangement as it seeks to build a more sustainable market that caters to the requirement of investors.

Despite the fact that many of the principles have been mentioned in previous policies, the statement testifies to the authorities’ commitment to reforms necessary for ensuring the healthy development of the stock market.

In particular, the statement said the relationship between the State and the market should be clarified, with the market allowed to play a central role in resource allocation. If well implemented, there would be less administrative interference hindering the normal growth of the stock market.

Li Jiange, head of a major securities firm and former senior official of the China Securities Regulatory Commission, said during a weekend financial forum that the commission used to face much pressure from influential government departments for allowing unqualified State companies to get listed.

Li has revealed an open secret. It is well known that China’s stock market has been launched in the 1990s primarily for the cash-thirsty State firms to finance for their growth.

Normally, the stock market should be a platform where companies with good growth prospects pool money for accelerating their development, ultimately improving the vitality of the whole corporate sector to benefit the national economy.

If  the regulatory commission is subjected to too much administrative pressure and the listing standards cannot be abided by, then the quality of the listed companies would not be ensured and the interest of investors would be jeopardized. Upset investors would in turn refuse to trade, leading to failure of IPO plans.

The short history of China’s stock market is a case in point.