Columnist Chen Yukio Takader, Editor-in-Chief of Arts/New waves

The slowing down of the registration system for some time has given rise to renewed concern, as a result of the news that has been put in place. The author has published a number of analytical articles on the reform of the registration system, and a special chapter on registration is included in the book “The logic of equity”.

Review of the reform of our registration system

In chronological order, we briefly recall the history of the reform of our equity issuance registration system.

The Central African Decision on the Comprehensive Deepening of Major Issues for Change, adopted by the Party’s 18th Triplenary Plenary on 15 November 2013, introduced for the first time a reform of the equity distribution system. The Decision states: “The development of a multi-tier capital market system, the promotion of equity registration reforms, multiple channels for equity financing, the development and regulation of bond markets, and increased direct financing.”

On 30 November 2013, ACAC issued its Opinion on Furthering the Reform of the New Unit’s Issue. The Opinion states that “the implementation of the requirements of the Party’s 183rd Inter-Parliamentary Decision to advance the reform of the registration system for the distribution of shares must further advance the reform of the new equity issuing system, clarify and streamline the relationship between the Government and the market in the process of issuing the new equity, accelerate regulatory transition, improve the quality of information disclosure, strengthen market restraint, promote the due diligence of the market participants and provide a good basis for the introduction of a register for the distribution of shares”.

On 5 March 2014, it was clearly stated in the report on the work of the large Government: “Promoting the reform of the registration system for the distribution of stocks”.

On 10 April 2014, the former President of the Chinese Licensing Council, Short, stated at the Bologna Asia Forum that the draft reform of the IPO registration system was introduced at the end of the year.

On 9 May 2014, the State Council issued a number of Opinions on Further Promoting the Healthy Development of Capital Markets (Nix New States). Article 9 of the new State states: “The reform of the registration system for the distribution of stocks is actively pursued.”

At the general meeting of the State Council on 19 November 2014, the Council of State stressed the importance of tightening the equity registration reform programme.

On 16 January 2015, the former President of the Chinese Licensing Council, Short, said that the advancement of the equity issue registration reform was a priority for the capital market reform in 2015.

On 13 February 2015, the Inspector General’s press spokesperson indicated that the first draft of the registration reform programme had been completed and reported to the State Council.

On 2 March 2015, the former President of the Board, Kiminje, indicated that registration is expected to fall this year.

On 5 March 2015, in his report on the work of the Government, Prime Minister Lee Lee stated that a change in the registration system for stock distribution was implemented.

On 9 December 2015, the Standing Committee of the State Council adopted a draft amendment to the relevant provisions, which was submitted to the Standing Committee of the National People’s Congress for the purpose of adjusting the application of the registration system for the distribution of shares. At the same time, the Board’s position is that registration reform will be vigorously pursued.

At its eighteenth meeting, held in Beijing on 27 December 2015, the Twelfth Standing Committee of the National People’s Congress adopted a decision authorizing the Department of State to adjust the application of the provisions of the Securities Act of the People’s Republic of China in the implementation of the equity registration reform. It is known that the decision is to be implemented for a period of two years, with effect from 1 March 2016.

Subsequently, on 20 February 2016, Shaw was dismissed. The Government’s report after 2016 makes no mention of the reform of the registration system. The two-year mandate of the Standing Committee has expired. Our intensive registration reform has been extended indefinitely. It can now be relaunched.

The need to understand registration to achieve reform

A troubling reform of the system of registration has come to an end, and it is a question that needs to be raised again today, and is we understand the registration system? In this context, several elements for understanding the registration system are as follows:

Companies finance through the distribution of shares is a means of financing firms under a market economy, known as direct financing. The long-standing issue of equity financing by our companies requires strict approval, whether approval or approval, and until today, the public distribution of shares by our companies needs to be approved and non-registered. Indirect financing through commercial banks does not require approval or even registration. Even if our direct financing is registered, it is actually more stringent than indirect financing conditions.

Further mention is made of market registration. In the case of multiple exchanges, the stock of a company with a shareholder is traded in which exchange plates are generally required for approval by the exchange and for approval or registration. Under the market concept, all companies are permitted to do so, exchanges generally use only registration without authorization. For a long time, there is a misconception that direct financing is tied to the market for financing, which must be marketed. Thus, there is no separate system of approval or registration of the market, which operates under the equities issue or registration system.

We will never read the approval system, registration system, regardless of the differences between distribution and market entry.

Sound understanding of market entry

Why is companies on the market? The concept of market participation derives from the creation of an equity system. The creation of a system of shares is a great invention of the human economy and the direct result of the system of shares is “a contradiction between the limited volume of individual capital and the increasing minimum capital required for effective production”. Thus, in the same year, Marx said that there was no train for human beings without a share. The pooling of funds raised by the equity firm can only be reduced through market transactions in the equity market. In this sense, the market is a subsidiary mechanism of the equity system, and there is no equity system in the market.

The second concept of equity markets needs to be understood: under a market economy, it is important to recognize that no one can make the right value judgement, i.e. that no one can price commodities, but only market pricing. This is the case for simple general commodities, especially for complex companies (equities). When people understand the market economy, it is understood that marketable stock prices are priced only and cannot be priced by so-called experts. In such a case, the managers of the stock market will not be able to pricing corporate shares. Therefore, there is no real problem of approval of the value of equity managers for company listing. There are many foreign equity markets, which aim at reducing transaction costs for investor convenience. As is the case with the Library’s book classification, the Library will not make a book price.