Liu He: China is becoming the most valuable market for investment
Updated 20:38, 22-Oct-2018
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Editor's note: Chinese Vice Premier Liu He had a joint interview with reporters from People's Daily, Xinhua News Agency and CCTV on the current economic and financial issues on October 19. The following is Part One of the interviews on the development of China's stock market.
Q: Vice Premier Liu, what is your opinion on the dramatic fluctuations in China's stock market recently?
L: Recently, there have been obvious fluctuations and declines in China's stock market, which are caused by many factors.
First, external factors. After major central banks raised interest rates, the global stock market began to fluctuate and trend down. The US stock market also experienced a market correction which continues at present. China-US trade friction has also affected the market, but frankly speaking, its psychological impact is greater than the actual impact. China and the US are currently in conversation with each other.
An investor monitors stock market information at a brokerage office in Beijing, China, October 8, 2018. /VCG Photo

An investor monitors stock market information at a brokerage office in Beijing, China, October 8, 2018. /VCG Photo

Second, China's economic structural transformation will inevitably have an impact on the stock market.
Third, market expectations have changed. Various uncertainties in the future economic environment have affected investors' behavior. Investors are very concerned about the development of the private economy and the protection of property rights. In addition, there are also some technical factors resulting in the plunging market in recent days, such as forced liquidation when the stock market goes down. All these factors together have caused the market fluctuation.
Recently, I have paid close attention to the assessment of China's stock market by international investment institutions and the market analysis by domestic professional institutions. The consensus is that China is becoming the most valuable market for investment in terms of global asset allocation. The bubble has been greatly reduced. The quality of listed companies is improving, and their valuation is at a historic low level. Therefore, many institutions suggest paying close attention to China's stock market, believing in its high investment value. I believe investors will hold rational views on these assessments. It can be said that the market correction is creating good investment opportunities for the long-term healthy development of the stock market.
Q: What new measures does the government take to promote the healthy development of the stock market?
L: The government attaches great importance to the healthy and stable development of the stock market.
Recently, the People's Bank of China, the China Banking and Insurance Regulatory Commission, the China Securities Regulatory Commission and other relevant departments are all studying and working on new reform measures and have rolled out some new institutional arrangements and policy tools.
The People's Bank Of China (PBOC) headquarters in the financial district of Beijing, China. /VCG Photo

The People's Bank Of China (PBOC) headquarters in the financial district of Beijing, China. /VCG Photo

First, in stabilizing the market, wealth management subsidiaries of banks are allowed to invest in the stock market. Financial institutions are required to step up the risk management of equity pledge financing. Funds managed by local governments and private equity funds are encouraged to help alleviate the equity pledge challenge faced by promising companies.
Second, in the reform of the basic market system, the Measures for the Management of Private Equity Business of Securities and Futures Institutions have been formulated. The regulators have improved the share buy-back mechanism for listed companies, deepened the market-oriented reform of merger and acquisition, promoted the reform of the New Over-The-Counter Market, and increased support for the listing of companies specialized in technological innovation.
A visitor trying on VR products at the 2018 World Conference on AI industry, Nanchang city, east China's Jiangxi Province, October 19, 2018. /VCG Photo

A visitor trying on VR products at the 2018 World Conference on AI industry, Nanchang city, east China's Jiangxi Province, October 19, 2018. /VCG Photo

Third, in terms of securing the long-term sources of funding for the market, the regulators will increase the financial and strategic investment of insurance funds in high-quality listed companies, strengthen institutional investors and build the foundation of long-term investment.
Fourth, in promoting the reform of state-owned enterprises and the development of private enterprises, a series of new measures are expected to be taken, including promoting mixed-ownership reform of state-owned enterprises in the capital market, supporting leading private enterprises to carry out industrial mergers and acquisitions, launching bond financing and equity financing support programs for private enterprises.
Fifth, in terms of opening-up, China will continue opening-up in all areas and accelerate the opening-up of banking, securities, insurance sector based on the spirit of President Xi Jinping's speech at Boao Forum.
This year marks the 40th anniversary of China's reform and opening-up. The major policy of reform and opening-up has been set, and the key lies in the implementation. This is a critical moment when action is more important than a dozen policy guidelines. All parties should implement policies more vigorously, have a stronger sense of responsibility, act quickly and effectively, and introduce specific policies to promote the healthy development of the stock market.