Investment reform coming

China's regulators should take some responsibility for stock market drops in the past two years, and the country will raise quotas for the Renminbi Qualified Foreign Institutional Investor (RQFII) system to boost the market, a top official said Sunday.

"A radical fluctuation of the stock market is abnormal and a financial reform is urgently needed," Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC), said in group interview during the 18th National Congress of the Communist Party of China (CPC) Sunday.

"As an emerging market, China has some impassable drawbacks in its stock market, including investment philosophies and wealth management institutions still in early development stages," Guo noted.

"It is a first, and a big improvement, for the regulators to admit their faults, which shows the authority's firm determination toward financial reforms," Li Daxiao, a research director at Yingda Securities Co, told the Global Times Sunday.

China will also raise quotas for the RQFII scheme, which allows investors to inject offshore yuan funds into the Chinese stock market, by 200 billion yuan ($32 billion) from the current 70 billion, according to Guo.

Guo revealed that the central bank and the State Administration of Foreign Exchange are preparing regulations for the newly-added quotas, which should be announced in the near future.

"That's a huge amount of money and will boost the depressed stock market," said Li of Yingda Securities.

Guo has pushed forward a series of reforms, including reducing transaction fees for stock investments, since he took up the official post of CSRC chairman in October 2011. The media have called his policies the "Guo Shuqing New Deal."

Some steps have already been taken toward reforming the Initial Public Offering (IPO) system, Guo said.

China launched IPO system regulations in 2006, and media recently reported that securities regulators may modify the regulations within this year.

Guo said that rumors of canceling the examination and approval mechanism for IPOs are unfounded, but added that regulators have discussed reforms to the system, and in the future more decisions will be made by the market rather than the governments.

Despite Guo's efforts, China's stock market still performed poorly this year.

China's shareholders who have suffered losses have gone online to complain about the unfairness of the stock market and regulators' faults in making decisions.

Responding to individual shareholders' criticisms, Guo said they are understandable, and he believes that "a more transparent market could be set up."

"Chairman Guo has made substantial efforts to set up a more transparent and market-driven stock market," Zhao Xijun, deputy dean of the School of Finance at Renmin University of China, told the Global Times Sunday.