Gov't intervention should be reduced: analysts
After the appointment of Liu Shiyu as the new chairman of China's securities regulator, how and whether he can push forward with reform while maintaining stability is the new focus of attention in the capital market, analysts said Sunday.
A brief report from the Xinhua News Agency on Saturday said that the State Council, China's cabinet, had appointed Liu to replace Xiao Gang as head of the China Securities Regulatory Commission (CSRC).
Liu, who resigned Sunday as chairman of Agricultural Bank of China, previously spent most of his career at the People's Bank of China, the central bank, and is thus highly experienced in overseeing the financial market, according to media reports.
Some investors already appear enthusiastic about the new appointment, with a pun in which Liu's name sounds like "bull market rain" in Chinese circulating on social media.
However, Pi Haizhou, a financial commentator, pointed out that a personnel change alone cannot solve all the problems in China's stock market.
"It is naive to place high hopes on a new CSRC head after the previous replacements," Pi wrote on his Sina Weibo account on Saturday.
Since the establishment of the CSRC, the securities watchdog has had eight chairmen, including Liu. Except Shang Fulin, who served for nearly nine years, the tenures of the others were all less than three years.
Difficult balance
The reform tasks facing Liu will be full of challenges, analysts said, especially after the market slump last summer, which saw the benchmark Shanghai Composite Index plunge from 5,178.19 points in June to 2,850.17 points in August.
"The market remains quite fragile, so how to carry out the reforms while still maintaining stability or at least avoiding volatility is a big concern," a securities analyst surnamed Li, who preferred not to give his full name, told the Global Times on Sunday.
The move to a new registration-based IPO system is the most pressing mission for Liu, said Guo Feng, chief investment advisor with Northeast Securities, citing the central government's long-term pledge to facilitate direct financing for the real economy from the securities market.
At the end of last year, the Standing Committee of the National People's Congress, China's legislature, passed a proposal to replace the current approval-based listing mechanism with a registration-based system, Xinhua reported.
"Nevertheless, considering last summer's market rout, a registration-based system won't be implemented in just one step," Guo told the Global Times on Sunday. "It requires a gradual process … and the final version of the mechanism may even have certain Chinese characteristics [to suit the A-share market]."
Moreover, from the perspective of building a healthy capital market in the long run, amending the Securities Law is considered another important part of the reforms Liu will need to pursue, analysts said.
The regulations and penalties for securities-related crimes are no longer suitable for the current market situation, and there are a lot of controversial problems these days such as how to punish people involved in such crimes and whether there may be a need to introduce class-action lawsuits, said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
Also, the policy-driven characteristics of China's stock market should be changed, Dong said, while noting that the government intervenes from time to time for the purposes of protecting the interests of individual retail investors.
With too much regulatory intervention the market cannot play its role, and it should not rely on the authorities to adjust everything, Guo said.
Liu's other reform tasks may also include improvements to the delisting mechanism and investor protection, as well as certain internationalization efforts such as the Shenzhen-Hong Kong Stock Connect scheme, Li noted.
