People's Republic of China Financial Sector Assessment Program : IOSCO Objectives and Principals of Securities Regulation
The authorities’ vision of ensuring that the capital markets support China’s transformation towards a more market-oriented economy has driven capital markets development and, as the authorities recognize, the regulation and supervision of the markets. Looking forward, many of the challenge...
| Main Authors: | , |
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| Format: | Report |
| Language: | English |
| Published: |
Washington, DC
2017
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| Subjects: | |
| Online Access: | http://documents.worldbank.org/curated/en/363291512541399092/China-Financial-sector-assessment-program-detailed-assessment-of-observance-IOSCO-objectives-and-principals-of-securities-regulation http://hdl.handle.net/10986/28992 |
| Summary: | The authorities’ vision of ensuring that
the capital markets support China’s transformation towards a
more market-oriented economy has driven capital markets
development and, as the authorities recognize, the
regulation and supervision of the markets. Looking forward,
many of the challenges ahead will continue to require a
careful balancing of the developmental and stability
mandates, which in turn would have an impact on regulation
and supervision. In the case of China, many of the
challenges ahead stem from the authorities’ vision to
further develop the markets and the potential approaches to
do so in a manner that delivers more market-based solutions,
while ensuring investors’ protection and financial
stability. For example, to further strengthen the role of
disclosure in the public markets and the private exercise of
rights work would be required on several fronts, including
initiatives to (i) strengthen corporate governance of
issuers as a key step to improve the quality of their
financial disclosure, (ii) ensure that different gatekeepers
comply with their responsibilities, (iii) enhance investors’
ability to exercise their rights and (iv) foster greater
participation of institutional investors in the markets,
some of which are not covered by the IOSCO Principles.
Further, from a broader perspective a key challenge for the
CSRC and the Chinese authorities is to ensure that the
multi-tiered market is implemented in a way that it does not
adversely affect investors’ confidence in the capital
markets as a whole. To this end, the CSRC should keep the
National Equities Exchange and Quotation Corporation (NEEQ)
and the securities companies that operate in it under close
monitoring. In addition, as planned by the authorities,
standards should be implemented to facilitate the regional
trading platforms to develop safely and operate as an
effective way to bring local financing to local businesses.
In the long run, the authorities should consider the
development of a common framework that encompasses all
non-exchange trading platforms, while allowing for
differences in the role that the CSRC would play in their
oversight. Similarly, further development of the futures
markets would require consideration of the potential need
for a more sophisticated business model for futures
intermediaries and how best to foster the confident
participation in the market by endusers. This will require
the CSRC to assess whether changes are needed in the
regulatory framework as well as education programs and
continued close monitoring of market activity and risk
management practices. Finally, because of the importance of
the audit process for the reliability of financial
information across the financial sector, it is critical that
the authorities unite their efforts to ensure high quality
audits and a well-regulated profession. The creation of a
single, independent oversight body might be an option to
achieve this objective. |
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