Four-member Forum

The roll-out of the registration system will not be a step-by-step one, which is in fact a statement of short-term expected management. And then, we still have a long way to go in terms of trading systems, market systems, regulatory systems and appropriate investor management.

Now!

Today, the President of the State, in his keynote speech at the opening of the meeting, announced that “constructions and pilot registration systems will be established on the Shanghai Stock Exchange”. This may be one of the most important recent pronouncements on capital markets at the top, and how we understand it?

Establishment and registration

Two concepts are first explained.

Original: ENGLISH

All known as the “Scientific and Technological Innovations”: Landing Sea equity hosting centres by the end of 2015. (b) In locating, it is mainly directed towards scientific, technological, innovative and micro-enterprises that have not yet reached maturity but have better growth potential, and that meet the normative and more visible “four new” economic characteristics.

The Shanghai Collaborating Centre has set open-ended branding conditions for start-up, long-term enterprises, emphasizing their scientific and technological innovation content for start-ups, emphasizing growth for long-term enterprises, and introducing financial indicators such as business income, profits, market value, etc. for advanced enterprises in order to improve coverage of different life-cycle enterprises.

The creation of a calibrium at the time of the current turn was important for building multi-tier capital markets. While it is difficult to compete with the new three-boards and entrepreneurship, it is only competition that can shape a more dynamic capital market pattern.

Registration

The registration system means that the applicant for the issuance of securities will, by law, make all information and material relating to the issuance of securities publicly available, make it a legal document and send it to the competent body for review and that the competent authority is only responsible for examining whether the information and information provided by the applicant has complied with the obligation to disclose the information. Its most important characteristics are:

Only registration documents are subject to formal review by the issuing authority under the registration system without substantive judgement. In cases where disclosure is appropriate, the securities administration shall not refuse registration on the grounds that the securities price or other conditions are not fair or that the company’s prospects presented by the distributor are not reasonable. The registration system favours ex post facto control. At the heart of the registration system is that, as long as the material provided by the distributor of securities is not false, misleading or omitted, even if the securities do not have any investment value, the security authorities are not entitled to intervene, since voluntary ownership is considered an inalienable right of investors.

Here, it is necessary to mention our IPO system. The IPO system of the National Unit went through the “line system” from 1992 to 2001 and the “approval system” from 2006. In December 2015, the registration system was officially introduced, but at that time the registration news had been blocked by the impact on the large dispossessment. At its 33rd meeting, on 24 February 2018, the Standing Committee of the Twelfth National People’s Congress decided to extend the authorization for the registration of stocks for a period of two years until 29 February 2020. The registration reform process is less than expected.

Why is it going forward?

At the beginning of his tenure, the Chairman of the Board, Mr. Liu, stated that “registration is the cornerstone of the long-term healthy development of capital markets” and made it clear that “must be done”. Today, in China, the registration system has finally begun, and why is the pilot option going forward?

To answer this question, it is fearful that it will start with the emerging strategy. As early as September 2013, the Institute began discussions on the establishment of a strategic and emerging board, and at the end of the year, it was informed of the establishment of the request. Public information shows that strategic brands will be issued on a register basis, centred on marketization and disclosure, under the overall institutional framework of registration, for enterprises applying for listing in emerging boards, and for future refinancing applications, with due consideration given to simplifying the distribution process.

As can be seen, the strategic brand was initially designed on the basis of registration. Although, for various reasons, the strategic brand was deleted in the revision of the draft “Three Five” plan outline, the handover has to some extent provided the basis and conditions for registration reform. The Director of the Financial Research Institute of the University of China’s Institute of Social Sciences, Lee Yongson, believes that the business involved in the roll-out is similar to that of the strategic branding enterprise, which is justified as a registration pilot.

Responding to a question from journalists today, the Officer-in-Charge of the Institute indicated that the boards were designed to fill the short-term of technological innovation in capital market services and were incremental reforms in capital markets. The so-called “increase change” means not to touch on stock patterns and has significantly reduced the resistance to reform, and perhaps a smart approach to the “hard stone” of registration.

In addition, it is particularly urgent for China, which is undergoing a process of transition from factor-driven growth to innovation-driven growth, to do so. However, from the overall quota-to-market ratio analysis, the country’s pioneering business is still relatively low and is expected to create a favourable environment for the development of a creative enterprise in the form of a pilot registration system.

Reform of registration cannot be delayed

Today, following the opening of the speech by the President, the entrepreneurship board should be resounding, reflecting some of the market concerns about the introduction of a registration system.

Market fears are concentrated on two fronts: first, a large number of companies will be placed on the market after registration, causing a setback; and secondly, a high-over price bureau for small dispossessments will be broken when registration is implemented, market valuation will return to reason and speculative spaces will change. However, from the first point, there is no evidence that IPO will bring down the prices of equity and that each major enterprise issue will be opposed by investors for immediate benefit. From the second point of view, the transition from approval to registration will inevitably have an impact on market valuation, thus affecting market sentiments and interests patterns, which will also require time for market disintegration. If regulation takes into account only the short-term outlook of the market, slowing down or even dare to reform, the longer-term adverse effects that may arise in the future will become greater.

Of course, the A market does not have the conditions for full registration at this stage, but this is why it is also the first to introduce the pilot.