China stresses capital market opening-up, tighter IPO scrutiny

China will further open up its capital market while preventing risks, and urge tighter scrutiny on companies seeking to list their shares to promote reform on registration-based initial public offering (IPO) system, the head of the country's securities regulator said Saturday.

"We will keep an open, supportive attitude toward the set-up of institutions as well as the launch of businesses and products," said Yi Huiman, chairman of the China Securities Regulatory Commission, at a roundtable of the China Development Forum, noting that risk prevention is also essential.

While continuing to encourage normal cross-border liquidity flows, Yi warned against a large amount of hot money running in and out. "For any market, big inflows and outflows of hot money would be detrimental to healthy development and must be strictly controlled."

He also urged cooperation with U.S. regulators to properly address the issues concerning China concept stocks, saying that "disagreements can only be resolved through negotiation".

Meanwhile, Yi cited that "the registration-based IPO system doesn't mean looser vetting requirements".

China has the world's biggest retail investor base of 180 million. Regulators, thus, must ensure that listing candidates make full and high-quality disclosures and abide by China's industrial policies, he mentioned.

The registration-based IPO system aims to provide investors with investable companies of more values, according to Yi, which, as a result, asks for higher requirements on "gatekeepers".

However, many underwriters are still "wearing new shoes but walking on the old path," Yi stressed, vowing that China will urge them to step up their due diligence and shoulder more responsibility and punish those trying to bring "sick" companies to the IPO market.

China has inaugurated the registration-based IPO system on Shanghai's Nasdaq-style sci-tech innovation board, also known as the STAR market, and Shenzhen's start-up board ChiNext, in order to further vitalize the country's capital market.

By the end of 2020, China had seen three consecutive years of net foreign capital inflows, with overseas investors' holdings of A-share assets exceeding 3 trillion yuan (about $460.8 billion), Yi noted.

(With inputs from Reuters, Xinhua)

(Cover image via CFP)

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