STAR Market Spearheads Capital Market Reform

The first batch of 25 stocks listed on the science and technology innovation board（STAR） saw their prices rise by approximately 90 percent by the end of October. The Nasdaq-style hi-tech board was launched in the Shanghai Stock Exchange （SSE） on July 22.

The short-term performance of individual stocks is not a proper gauge to evaluate the ongoing capital market reform advanced by the STAR market， Yi Huiman， Chairman of the China Securities Regulatory Commission （CSRC）， said in a recent interview with Xinhua News Agency. He underscored confi dence， patience and a long-term perspective for assessing its performance.

Leveraging capital to transform the Chinese economy into an innovative one and exploring ways to make institutional improvements in the capital market were the dual missions the board has been tasked with， Yi said.

For regulators， the criteria to keep the tempo and intensity of the reform in the STAR market are mainly related to progress in achieving the dual missions， incubation of leading science and innovation enterprises and institutional innovation.

“The ongoing reform can be described as meeting expectations with stable performance，”Yi said.

The STAR market has attracted more than 4.4 million eligible investors and seen fairly active trading with an average daily turnover of 14.2 billion yuan （$2.03 billion）， accounting for 3 percent of the total trading on the Shanghai and Shenzhen bourses.

On top of the numbers， the major achievements of the board are refl ected in its institutional innovations， with the implementation of the registration-based initial public offering （IPO） system being the key， said Zhang Anyuan， chief economist with China Securities Corp.

The STAR markets adoption of the new IPO system， which requires strict information disclosures but does not need approval from the CSRC， is viewed as its “biggest institutional innovation.”

Over the past few months， the registrationbased IPO system has proved to be effective and won wide recognition from the market. As its information disclosure mechanism requires relevant parties to take responsibility for their work， the system enhances the openness and transparency of all procedures. Under the new system， the time taken for registration has been shortened to less than four months.

“It has also facilitated the listing of a batch of qualified sci-tech companies，” Yi said， “Im confident that over time， the new board will become the cradle of great tech disruptors.”

Although the registration-based IPO system is taken as the bellwether of broader capital market reform， Yi said it is not wise to simply copy what has been done in the STAR market.

“We will factor in different functions of the markets at various levels as well as their own conditions to steadily advance reform based on thorough planning and on the premise of market stability，” he said.

First and foremost， the registration-based IPO system will be steadily advanced to significantly improve the efficiency of resource allocation in the capital market， he said.

Revisions to the Securities Law will facilitate the reform of the growth enterprise market and a broader experiment of registration-based IPOs， according to Yi.

Institutional improvements based on the experience of the STAR market will be made to optimize the basic rules of the capital market， including those concerning stock issuance， underwriting， trading， supervision and delisting.

In September， the CSRC specifi ed 12 priorities for upgrading the capital market， including instituting stronger safeguards for investors， attracting medium- and long-term capital investment and further opening up the capital market.

Apart from a series of reform measures already introduced， the securities regulator is stepping up efforts to devise an action plan to improve the quality of listed fi rms.

Rules for spin-off listings will be released as soon as possible， while the protection of investors and the streamlining of the CSRCs roles will be strengthened， Yi said.

For policymakers， the challenge is to deliver certainty amid uncertainty by creating proper conditions to advance reform and setting a timetable at the top level， according to Yi.

The principles they use to fi gure out solutions include making steady progress， doing a good job in coordination and being as fast as possible.

The touchstone they use to evaluate the success of the overall reform of the capital market comprises two parts—“whether market expectations can be truly improved and whether market confi dence can be lifted，” Yi said.