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China to further improve quality of listed companies to sustain steady, healthy growth of capital markets

Zhang Yue
Updated: Sep 23,2020 23:11 PM

China will work to refine the institutions and rules for corporate governance of listed companies, improve their information transparency and disclosure, and strengthen the mechanism of diverse exit options for listed firms, in an effort to enhance the quality of listed companies, protect the rights and interests of investors, and sustain steady and healthy growth of capital markets.

A host of measures were decided at the State Council’s executive meeting chaired by Premier Li Keqiang on Sept 23.

Raising the quality of listed companies is conducive to sustaining the steady and healthy growth of capital markets and boosting their support for the real economy. The Chinese government puts strong emphasis on this work. General Secretary Xi Jinping has stressed the need to improve institutional fundamentals of the capital market and raise the quality of listed firms. Premier Li Keqiang has set out requirements for enhancing institution-building.

Recent years have seen robust and steady growth of China’s capital market, with visible rises in both quality and quantity of listed companies. By the end of September this year, the number of publicly traded companies on the Chinese mainland exceeded 4,000, with a total market capitalization of over 79 trillion yuan.

It was decided at the meeting that in developing well-regulated, transparent, open, vibrant and resilient capital markets, the institutions and rules for corporate governance of listed companies must be refined. Shareholders with a controlling stake, actual controllers of companies, directors, supervisors, and senior management must fulfill their statutory duties and responsibilities. The mechanism for institutional investors to participate in corporate governance will be enhanced, and guidelines on internal controls will be widely applied. Information transparency and disclosure will be improved.

"Improving the quality of listed firms is crucial for the sound development of the security market," Premier Li said.

Greater efforts will be made to enhance the performance of listed companies. Well-run firms will be supported in going public. Institutions for asset restructuring, acquisition and equity carve-out will be developed, and those for refinancing and bond issuance of listed companies improved. More eligible foreign investors will be allowed to make strategic investments in listed companies. The mechanism of diverse exit options for listed firms will be strengthened by refining standards, simplifying procedures and unclogging channels. Any circumvention of delisting will be strictly dealt with.

Inter-agency regulation and supervision will be stepped up. Issues relating to share-pledging risks, funds misappropriation and against-regulation guarantees must be properly resolved. Heavier punishment will be imposed on any violation of laws and regulations, including market manipulation and insider trading, to significantly raise the cost of such actions.