Capital markets are of great significance for high-quality economic development, and one of the requirements for building a high-level socialist market economy system is to improve their functionality. Continuously promoting the construction of the capital market system is a prerequisite for better leveraging the pivotal role of the capital market.

Incremental improvements

The development of China’s capital markets has spanned over 30 years, and continuous institutional reforms have injected incremental vitality into the markets. Among these, three major reforms have effectively propelled the markets forward.

The establishment of the Shanghai Stock Exchange and the Shenzhen Stock Exchange in 1990 marked the official beginning of China’s capital markets. In the early stages of the reform and opening-up, traditional commercial banks held a decisive position in enterprise financing through planned financing. It was not until the approval of the Shanghai Stock Exchange and the Shenzhen Stock Exchange that China’s capital markets began rapidly injecting new vitality into financing for society at large. Large-scale direct financing through IPOs became a new financing option for enterprises. With the opening of the capital markets, society generated spontaneous momentum for the reform of state-owned enterprises, characterized by clear property rights, defined rights and responsibilities, and the separation of the government and enterprises.

At the regulatory level, in 1992 the establishment of the former Securities Commission of the State Council and the China Securities Regulatory Commission (later merged) led to the establishment of a securities market management system framework with Chinese characteristics.

In 2005, the share-trading reform was launched, which transformed China’s capital markets from “semi-circulation” to “full circulation.”

The reform of the registration system launched in 2019 has laid the foundation for China’s capital markets to effectively support high-quality development. The institutional adjustment of the listing process has effectively promoted the market-oriented reform of stock issuance.

Future direction

To a certain extent, the comprehensive implementation of the registration system has taken China’s capital markets to a new level. In order to better leverage the central function of capital markets and promote the deepening and implementation of the stock issuance registration system, a series of continuous reforms and improvements in supporting systems and environments are still needed.

Firstly, it is suggested to continue promoting the comprehensive improvement of China’s capital market system. The stock issuance system is a key aspect of capital markets, and it is important to grasp the boundaries of IPO issuance, manage the risk allocation of enterprise listings, and better implement the principle of allowing capital markets to serve the real economy.

Secondly, we will continue to expand the high-level two-way opening of China’s capital markets while balancing openness and security. Modern capital markets must embrace a bidirectional opening approach. High-level openness not only helps guide the orderly flow of funds, but also stimulates market vitality, providing a broad platform for enterprise development and innovation.

Thirdly, we will continue to strengthen the rule of law in capital markets and comprehensively protect the legitimate rights and interests of investors. Investors are the most important participants in the securities market.

Shi Yang (associate professor) and An Yiming are from the School of Economics and Management at Northwest University.