China’s ‘two sessions’ 2024: securities regulator comes out swinging at first press conference

China’s ‘two sessions’ 2024: securities regulator comes out swinging at first press conference

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However, he added, “if the market gets out of control and experiences huge irrational shake-ups, liquidity runs, investor panic, a major investment confidence breakdown … [the commission] should make resolute moves to fix dysfunction.”

The conference, held with other high-level officials on Wednesday, took place on the sidelines of the “two sessions”, the annual meetings of the national legislature and political advisory body. The economic heavyweights were there, in part, to tamp down jitters during a restive period that has spooked overseas investors.

We will keep our eyes open to strengthen early correction of problem institutions and enterprises

Wu Qing
Wu, who earned his reputation as a tenacious enforcer of the law by cracking down on brokers during his time at the regulator from 2005 to 2009, said institutional improvements would be forthcoming to prevent systemic risks and strict scrutiny would be placed on behaviour like fraud, market manipulation and insider trading.

“In our next stage of work, we have to exponentially increase the scale and the number of times we do on-site checking,” he said.

“We will keep our eyes open to strengthen early correction of problem institutions and enterprises, and handle a variety of risks as early as possible.”

China market regulator’s rescue act seeks to guard financial and social stability

Stock markets in mainland China and Hong Kong slumped to multi-year lows in early January, as investors’ confidence in the world’s second-biggest economy has evaporated under pressures wrought by China’s ailing property market, decelerating economic growth, an exodus of overseas capital and rising global interest rates.
The CSI300 index, which tracks the major listed firms in Shanghai and Shenzhen, dropped 6.3 per cent in January, the sixth consecutive month of decline. It bounced back with a rise of 9.4 per cent last month, after a set of cooling policies took effect and the “national team” of state-backed funds stepped in to buy swathes of onshore stocks.

Hong Kong’s benchmark Hang Seng Index dropped 9.2 per cent in January, followed by a 6.6 per cent rise last month. It was up 1.7 per cent by close of business Wednesday.

Wu’s remarks came amid a broader context, most notably an ambitious plan to turn the country into a “financial superpower” articulated during the twice-a-decade central financial work conference held in late October.
At the conference, President Xi Jinping said the financial sector required more centralised supervision, and referred to the prevention of financial risks and the preservation of stability as an “eternal theme” for the government.

Wu, who briefly ran the Shanghai Stock Exchange after a rout in 2015, said the overall quality of the market will be enhanced by more thorough checks before initial public offerings (IPOs), and also by increasing the frequency of regular checks on public companies to more easily spot any illegal action.

Protecting the interests of smaller investors is the single most important mission for us in a market like China

Wu Qing

The CSRC will also enhance its delisting system for chronic offenders, he said – by force if necessary.

When discussing examples, Wu mentioned big-ticket fines that had been announced a week prior, and added some recent cases involving insider trading or market manipulation have been transferred to the proper authorities for criminal charges.

“Protecting the interests of smaller investors is the single most important mission for us in a market like China, which is dominated by such investors,” he said.

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Hong Kong stock market falls below 15,000 level, its lowest in 15 months

Hong Kong stock market falls below 15,000 level, its lowest in 15 months

Wu also said listed companies should be mandated to give dividends to shareholders, and pledged the regulator would crack down on large shareholders’ illegal or otherwise dishonest reduction of stakes – both of which have been persistent concerns.

The securities chief also affirmed the need for effective regulation of quant trading – trades conducted with the heavy use of automation and algorithms – to ensure market fairness.

Headway has already been made in that department, with China punishing a quant hedge fund for offloading stocks, and levying suspensions and fines on Shanghai Weiwan Private Fund Management for high-frequency trading in index-futures contracts late last month, raising speculation over further policy tightening.

All this primary activity drains liquidity and expands the float, dragging performance down

Louis-Vincent Gave

As for regulatory personnel, Wu said he will adopt a strict management approach for staff to guarantee quality of work and combat corruption.

Louis-Vincent Gave, founding partner and CEO at research firm Gavekal, said over the past decade there have been several issues related to the capital markets, affecting areas like IPOs and rights.

“All this primary activity drains liquidity and expands the float, dragging performance down,” he said.

Gave said further opening up China’s financial market would help salvage the downturn.

“If you do that, you will remove the one hurdle a lot of investors have about investing in China: the fear that one’s money could be trapped.”

Additional reporting by Mia Nulimaimaiti and Luna Sun

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