China To Undertake Securities Industry Census
The China Securities Regulatory Commission (CSRC) is
to undertake a census of China's deeply troubled securities
industry, which handles domestic equity trading on the
Shanghai and Shenzhen exchanges.
The census would be the first step in a major overhaul
of both markets. So far, the government has not been
able to reach an internal consensus about what to do,
and instead, has sought to clean up the two markets in
a piecemeal fashion by seeking overseas rescues of troubled
securities houses.
Both exchanges are trading at new lows, with the Shanghai
composite index closing at 1269.00 on Feb 4, and the
Shenzhen composite index closing at 312.01 the
same day, immediately before the Chinese new year holiday.
For China's economists and government regulators, the
domestic securities industry has become a major headache,
and sometimes, the subject of more than a little finger-pointing.
In the early nineties, when they first became active,
shares were hotly traded by many Chinese, and many state-owned
enterprises (SOEs) sought listings on the exchanges to
raise capital. However, many of the SOEs are money-losing
operations, and have floated a small amount of their
shares. As a result, price and volume have hit new lows.
Scandals and corruption have plagued both exchanges,
and IPOs have been suspended for five months. Now, almost
all Chinese companies avoid domestic listings, seeking
instead to list in overseas markets where the rules and
regulations are more transparent.
The size of the problem is so great that the premier,
Wen Jiabao, has put off confronting the issue, instead
focusing on the overseas listings of China's
banks. As a result, many Chinese companies have received
private equity funding, or have listed overseas to fund
their capital expansion needs. This has contributed to
China's number one ranking worldwide as a recipient of
foreign direct investment (FDI).
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