China published a set of rules on Friday that would tighten scrutiny over stock listings, public companies and underwriters, as regulators ramp up efforts to revive investor confidence.
Regulators will vet initial public offerings (IPOs) more closely, crack down hard on securities fraud, and encourage listed firms to increase dividend payouts and buy back shares.
The goal is to make China’s capital market “safe, regulated, transparent, open, vivid and resilient,” Li Chao, vice chairman of the China Securities Regulatory Commission (CSRC), told a press conference in Beijing.
China’s stock market has rebounded from five-year lows hit in early February, after Beijing appointed veteran regulator Wu Qing as new CSRC chairman.
Under Wu, the watchdog has taken a series of market-friendly measures, including tighter regulation over computer-driven “quant” funds and fresh curbs on short-selling.
The CSRC, which has already slowed the pace of public share sales, said on Friday it will further strengthen supervisions of company listings.
IPO applications will be strictly vetted to prevent companies from excessive fundraising, while accounting fraud and false statements will be severely punished, according to the rules.
In addition, the CSRC will adopt “counter-cyclical adjustment” in the IPO market to take into account supply and demand in the secondary market, and will also boost onsite inspections on listing candidates.
China’s benchmark CSI 300 Index (.CSI300), opens new tab is up 4% this year but is still 40% down from a peak hit in 2021, pressured by a slowing domestic economy, a deepening property crisis, capital outflows and rising political tensions with the West.
‘TEETH AND HORNS’
The CSRC on Friday also published rules to step up supervision of listed companies, vowing to protect investors with “teeth and horns”.
The regulator said it would crack down on securities fraud as well as accounting manipulation such as what is known as “big bath” – in which a company’s management makes poor results look even worse in order to make future performance look better.
The CSRC will also prevent big shareholders from reducing holdings illegally, for example via short-selling.
In addition, the CSRC urged listed companies to increase dividend payouts and take concrete measures to strengthen market value management.
Listed companies are encouraged to buy back shares, and constituents of main stock benchmarks are required to draw up plans for stock purchases in the event of share price slumps.
To promote healthy development of brokerages and mutual fund companies, the CSRC also warned against money worship, extravagance, hedonism and “showing off wealth”.
