Chinese lawmakers on Sunday approved a State Council proposal for stock listing reform at the end of a bimonthly legislative session which began Monday in Beijing.
The decision by the National People's Congress Standing Committee will take effect from March 1.
The State Council will then have the power to change the listing system on the Shanghai and Shenzhen bourses from approval-based to registration-based any time within the next two years.
Under the current system, new shares are subject to approval by the China Securities Regulatory Commission (CSRC), which controls both the timing and price. The new system will allow the bourses to take over IPO approvals and clear the backlog of companies on the waiting list. Details of the switch are to be worked out by the State Council, which will submit progress reports.
Stock market regulators must now step up post-registration supervision and take measures to protect investors.
Markets have been anticipating the change for some time now. The switch was a highlight of the CSRC annual conference this year and to get the authority for the switch was listed by the State Council as a major task for 2015. The process was delayed due to the summer's capital market volatility, which wiped nearly 5 trillion U.S. dollars off market value between June and August.
On Nov. 10, President Xi Jinping stressed the creation of a stock market with sound financing, regulation and investor protection at a meeting of the Central Leading Group for Financial and Economic Affairs. In the same month, the CSRC introduced significant changes to IPOs, allowing investors to subscribe without paying into escrow accounts in advance. The changes prioritize information disclosure rather than pre-IPO approval and simplify procedures for smaller IPOs.
The new system is expected to be introduced gradually, with the CSRC continuing to manage most IPOs in the early stages.
