Securities Regulatory Commission Unveils Plans for 2014

China’s Securities Regulatory Commission has unveiled far reaching reforms of the country’s IPO system. The reforms, unveiled at a press conference on Saturday, are seen as critical to turn China’s IPO issuance mechanism from an approval-based to a registration- based system. Investors believe the market will play bigger role in judging the risk and value of listed companies in the future. And that will greatly inject more momentum into the stock market.

New plans to reform China’s IPO issuance mechanism, plans that include pushing forward the gradual replacement of the current system to issue new shares. New listing firms currently experience delays and have to navigate a complicated application process. The approval-based system can take multiple rounds of reviews and several years before investors receive approval from the securities regulator.

"We will expand the scale of information disclosure and make our review standard and process more transparent. We will open the IPO process to the public so that they can have a closer supervision to the issuance process." said Deng Ge, Spokesman, China Securities Regulatory Commission.

Mr. Deng predicts that around 50 companies would be able to complete their registration procedures for IPOs by the end of January.

And under the new registration-based IPO system, China’s securities regulator would only be responsible to decide whether companies fulfill the rules. The values and risks would be for investors and the market to judge.

The registration-based IPO system was actually released in the communique after the conclusion of the third plenum of the 18th Central Committee of the Communist Party of China. And under the new system, China’s securities watchdog is to boost its supervision over listed companies while loosening the approval process before IPOs.

Zhao Xuejun is the CEO of Harvest Fund. He says he is impressed by the scale of the reform unveiled this time.

"I believe the reform plan unveiled today highlights three aspects. Firstly, it strengthens the information disclosure responsibility of all players in the market. It ALSO tightens the punishment methods for those who break the rules. And most importantly, it will rationalize China’s IPO pricing mechanism by expanding current pricing scales." said Zhao Xuejun, CEO, Harvest Fund Management.

Investors also believe the market will play a bigger role in China’s IPO process in the future.

"China’s regulators will only check the legality of IPO candidates in the future, while the market will decide their profitability, pricing and other matters. Meanwhile, their financing channels will be expanded to meet the needs of the market. And the pricing and IPO issuance methods will be decided by issuers themselves. The IPO issuance process will speed up massively." said Luke Wang, Vice President, China Galaxy Securities.

In the meantime, China’s securities watchdog is also tightening up its supervision of the stock market. It says it will further boost its means of supervision in the future.

The CSRC has dealt with 46 cases concerning incomplete or deceitful information disclosed from January to October this year.