Economic Daily:

Since the 18th CPC National Congress, especially as the capital market deepened reform across the board at a faster pace in recent years, there has been a significant improvement in the efficacy of the market, the market ecology has continued to improve, and the capabilities to serve the real economy has kept growing. What are the structural changes that have occurred regarding the capital market in the past decade? Would you like to give us an introduction? Thank you.

Li Chao:

Thank you for your question. Structural problems are a key issue impeding the high-quality development of the capital market. Over the years, we have relied on reforms to address structural difficulties. It is fair to say that, with the past 10 years' efforts to develop and reform, there have been many positive structural changes, which are as follows:

First, the structure of a multi-level market system has changed greatly. With continuous efforts, the multi-level market system improved with increasingly prominent characters in each market and board. For example, the main boards of the Shanghai and Shenzhen stock exchanges highlighted the positioning of "main boards for blue chips." China's Nasdaq-style sci-tech innovation board, also known as the STAR market, is characterized by "hard technology." The ChiNext board continues to provide services for innovative start-ups and companies. The Beijing Stock Exchange and the "new third board" focus on serving innovative small and medium-sized enterprises. In addition, venture capital and private equity funds have played an increasingly important role in the capital market.

Second, the structure and quality of listed companies saw significant changes and improvements. In terms of the industries, there have been fundamental changes in the structure of listed companies. The number of companies listed in strategic emerging industries totaled nearly 2,200, and the number of listed companies in strategic emerging industries valued at over 100 billion yuan has increased from zero to 46. Listed companies have become an important driver for economic transformation and upgrading. In terms of performance, the asset size of listed companies has increased two-fold compared to 10 years ago. Revenues and net profits have maintained relatively high growth. The accumulated cash dividends in the past three years totaled 4.4 trillion yuan, increasing by nearly 50% compared to the previous three years. In terms of governance effectiveness, the listed companies have seen their operations increasingly standardized and addressed a series of deep-rooted problems in the capital market through collective efforts, such as the occupation of funds by large shareholders and illegal guarantees. 

Third, the effect of the market law of "survival of the fittest" is shown quickly. With a distinct feature of an A-share market's differentiation being more evident, investors from various fields prefer the leading stocks and good performance stocks. A regular delisting mechanism has been gradually established, with its process being significantly streamlined. From 2019 to 2021, the number of firms experienced compulsory delisting was more than three times the total of the previous decade, and a sound ecosystem that provides a two-way access for getting listed and delisted is taking shape faster.

Fourth, the investor structure has been gradually optimized. The professional, institutional investors continued to grow. By the end of this May, the market value of stocks in circulation owned by domestic professional, institutional investors and foreign shareholders accounted for 22.8 percent, up 6.9 percentage points from 2016. In 2021, the proportion of individual investors' transactions decreased to less than 70% for the first time, and the concepts of value investment, long-term investment, and rational investment were gradually developed.

Fifth, the structure of the product supply system has also been changed and diversified. We continued optimizing the mix of equity, bond, and future products, enriched risk management tools to meet residents' demands for wealth management, and have better served major national strategies. We timely launched products such as asset securitization, sci-tech innovation bonds, and green bonds, as well as pilot public offering of REITs in the infrastructure sector. The access system for public fund products has been greatly simplified, the scale of equity funds has kept reaching new highs, and the participation of public funds in elderly care financial services has been continuously deepened.

Sixth, the guidance of respecting integrity and abiding by the law as well as punishing evil-doers and praising good-doers has continued to be strengthened. With the improvement of the all-around insurance system and the mechanism of "zero tolerance" in cracking down on crimes, the market operations are conducted in a more honest and law-based way. For example, we had inflicted much heavier criminal punishment for crimes such as fraudulent issuance and fraudulent information disclosure. For another example, the right safeguarding channels for small and medium investors were unblocked and the first securities class-action suit against Guangzhou-based Kangmei Pharmaceutical was resolved, with 52,000 investors reclaiming losses of 2.459 billion yuan, demonstrating that a diversified mechanism for rights exercise and protection focusing on resolving disputes through varied ways, supporting litigation, and representative litigation is taking effect.

Thank you!