Future development trends | Doing Business with China

The sustained development of China's economy has motivated a demand for financing by a large number of enterprises . Such demand alone will require that the capital market continues to maintain its trend of rapid development. At the same time, China's savings rate has been high and significant funds need to find diversified channels of investment. From the perspectives of both supply and demand, there will be greater development space for China's capital market, manifested specifically in the following:

There is still considerable room for the stock issuance market to develop. Stable growth of China's economy will increase enterprises' demands for financing, which will give impetus to the prosperity of the A-share market. With China's accelerating process of opening up and in order to meet the needs of foreign-invested enterprises for financing in China, CSRC has promulgated rules and regulations in relation to the financing of FIEs on the stock market in China. The issuance of shares and public listing of FIEs on the stock market has now entered the stage of actual operation, as a result of which China's securities market will quickly expand.
The general quality of publicly listed companies will improve. The CSRC will step up regulation and supervision of all publicly listed companies. This effort is, firstly, to improve the corporate governance structure of listed companies and guide them to establish modern enterprise systems. Secondly, the CSRC will push forward the improvement of accounting standards and information disclosure in order to make them converge gradually with international accounting standards and international practices. Thirdly, China has implemented a classified system of regulation and supervision according to the quality of the publicly listed companies. The system has clarified the responsibilities of regulation and supervision, thereby forming a coordinating mechanism between the audit of share issuance and the regulation and supervision of listed companies. Finally, systems of appointing independent directors and delisting companies has been implemented. All these measures will help to improve the general quality and competitiveness of listed companies.
Institutional investors will increase. The outline tenth five year plan for the national economy has expressly pointed out that active effort will be made between 2001 and 2005 to foster institutional investors such as securities investment funds, pension funds and insurance funds. At present, insurance funds can enter the securities market indirectly by purchasing securities investment funds. Pension funds, on the other hand, are taking on an increasingly important role and will in the future become the largest institutional investor in the capital market. At the same time, the entry of foreign institutional investors will play a positive role in terms of facilitating capital inflow, introducing technology and management expertise and strengthening both cooperation and competition, all of which will be conducive to enhancing the level of maturity of China's securities market.
There will be diversified trading products available at the stock market. In recent years , China's funds and bonds markets have developed rapidly . T-bonds, corporate bonds and transferable bonds will expand further in terms of the size of issues, which will offer the investors more investment options. After WTO accession , the competitive advantages of foreign investors in the aspects of business competence, market experiences, risk management and fund size will correspondingly pose advance requirements for financial products on the securities market and prompt further diversity of trading products. With the increase in the depth and width of China's securities market, a pattern will develop characterized by domination of stock markets, rapid development of bonds and funds and further trials on financial derivatives.
Market transparency will increase further. With improvement of accounting rules and information disclosure standards, the authenticity and reliability of corporate financial and accounting information as well as the transparency of corporate operations will be further enhanced. The principle of transparency in WTO rules also require that regulatory bodies change their conception of regulation and supervision, reduce the items subject to examination and approval and simplify examination and approval procedures so that the formulation and implementation of laws and regulations conforms with international practices and is transparent. All of these will help increase market transparency, enhance the predictability and procedural guarantee of policies and regulations, heighten public credibility and strengthen investor confidence.

Under the conditions of rapid and sustained development of China's macro economy and accompanied by enhancement of the level of securities regulation and supervision, gradual improvement of securities laws and regulations, the increasing importance given to the protection of investors' interests and the maturity of equity culture, China's securities industry will follow the liberalization, globalization and securitization trends of the international financial market. China's securities market will be more open , fair, efficient and orderly.