SCIO briefing on the reform and development of the capital market

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Liu Shiyu, chairman of the China Securities Regulatory Commission,
Li Chao, vice chairman of the China Securities Regulatory Commission,
Fang Xinghai, vice chairman of the China Securities Regulatory Commission,
Zhao Zhengping, vice chairman of the China Securities Regulatory Commission

Hu Kaihong, spokesperson of the State Council Information Office

Feb. 26, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. China’s capital market has long been watched closely by many people. Today we are delighted to invite to our press conference Mr. Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), and Mr. Li Chao, Mr. Fang Xinghai and Mr. Zhao Zhengping, the three vice chairmen of the CSRC. They will introduce to you the work done for the promotion of reform and development in China’s capital market and answer your questions. Mr. Huang Wei and Mr. Xuan Changneng, assistant chairmen of the CSRC, are also here today. Now, please welcome Mr. Liu.

Liu Shiyu:

Thanks every one for coming to the press conference of the CSRC.

In the past year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, the CSRC and its related agencies continued to aim for the overall targets of stable growth and structural adjustment while benefitting people’s well-being and avoiding risks, as well as following the country’s supply-side structural reform, in order to carry out the various work relevant to reform and development in China’s capital market. The work can be summarized in three words: stable, strict, and progressing.

The first word is “stable.” Since I began my work at the CSRC, I felt that the market wanted stability more than anything after the turbulences in the stock market during 2015. Our work in the last year delivered on this goal. First is the stable policy expectation. We adhered to market-based, legal and internationalized reform, maintained consistency in our policies and continued with those policies and practices that were welcomed by and proved effective on the market. We also fully respected market rules, met market needs and concentrated on our work. Second, the market ran steadily last year. In 2016, with the effort of investors, the Shanghai and Shenzhen stock markets witnessed fewer fluctuations. Investors grew more optimistic, the market was steadier and the various functions of the market were enhanced. Third, market reform was conducted steadily. We carried out problem-oriented reform, addressed the various problems behind the turbulent market with institutional reform and carried out reform at a steady pace.

The second word is “strict.” In the past year, we managed the market in a rules-based, thorough and strict manner. First, we had strict standards. We had a strict approval standard for IPO, in order to ensure the soundness of listed companies and avoid problems from the very beginning. Second, we had strict practices. We resolutely addressed all the disorders and problems in the capital market. Third, we had strict self-management. We strengthened the Party discipline within the CSRC and its related agencies to enhance our own political awareness and ensure the strict management of ourselves.

The third word is “progressing.” First, bolder reforms were pushed ahead. By upholding a market-based economy, rule of law and globalization, we managed to improve a series of fundamental institutions of capital market through problem-oriented reforms. The National Equities Exchange and Quotations has divided its listed companies into different markets. The legal status and operating rules of regional equity markets have been clarified. The State Council has issued related documents in this respect. We have increased the efficiency of IPO for enterprises from impoverished counties. We have revised major restructuring and refinancing systems for listed companies quickly and made great efforts to improve the regulation rules on securities, funds and futures business institutions. We have given full play to the Stock Exchange’s regulatory functions at the frontline. We have innovated the methods and mechanism for protecting investors’ rights and interests. We have explored and set up a diversified mediation mechanism for securities disputes.

Second, new efforts have been made to support the substantial economy. Last year, 280 enterprises’ IPOs were approved and 248 enterprises completed IPOs. The turnover exceeds 163 billion yuan ($23.7 billion). Here are more figures I’d like to share with you. The listed companies raised over 1.34 trillion yuan after refinancing last year. Mergers and acquisitions of 261 enterprises were approved, increasing the capital strength of listed companies by over 980 billion yuan. NEEQ reporters may notice that the number of the companies listed on the NEEQ system doubled last year, exceeding 10,000 by the end of last year. They financed more than 139.1 billion yuan throughout the year. The bond market has made steady progress thanks to the coordination and support of multiple sectors. Net increase of the funds raised through corporate bonds exceeded 2.7 trillion yuan last year. These funds have supported the growth of the substantial economy.

Third, new achievements have been made in two-way opening. The Shanghai-Hong Kong Stock Connect has been further improved. The Shenzhen-Hong Kong Stock Connect started operation. Securities institutions, as well as stock exchanges involved in the “Belt and Road” initiative, have made remarkable achievements. The CSRC created a closer relationship with international securities regulatory commissions in the cross-border securities regulation and cooperation mechanisms. And the efficiency has been further improved.

The above-mentioned three aspects sum up our work from last year. We offer background materials including statistic data for your reference.

Now, my colleagues and I would like to take your questions.

Hu Kaihong:

Thanks Mr. Liu. Now, the floor is open to questions. Please identify your media outlet before raising questions.


You underscored three keywords in your opening remarks, among which, “stability” is one of the highlights. This is also the word you have used frequently when chairing conferences in regard to the commission’s regular supervisory work. How can we understand what stability implies? How will the CSRC sustain this stability? Will the commission suspend some reforms in order to maintain stability of market operations?

Liu Shiyu:

There is an old Chinese saying that, “The tranquil watercourse is good for a voyage.” The behavior of the capital market in China has more than once justified the belief that no reform can be undertaken without a stable market environment. Moreover, reforms can even be retrogressive if the market is in a volatile state. We have never lacked lessons in this regard. However, if we do not persist in the reform trends of marketization, legalization and internationalization, the problems developing in the medium and long-term in the capital market can neither be reduced nor eradicated. The market will lack both the vitality and a solid foundation secured by stability. Because of this, reform and stability should work together.

I have already introduced to you the work of the CSRC in the past year and my personal view towards reform is that we will progress step-by-step and ensure we are on the correct path and moving in the right direction. The process of reform can be made into a metaphor of the pearl necklaces worn by the ladies present at the conference. There are several elements involved in threading a pearl necklace -- the quality of the pearls, first, and the proper holes to ensure their connection. The holes should be chiseled straight across diameter in a row, as even the most minor deviation will affect the value of the necklace. What do the pearls imply? They are the listed companies of high quality. Second, the thread that has to be smooth and firm refers to the path followed and the operational systems involved in the reforms. Third, the necklace is completed by putting those pearls into a line one by one, as it would never occur to us that a pearl necklace can be completed in one simple move. Fourth, the necklace needs a tapered end to prevent the pearls from falling off and being dispersed, so as to facilitate its use. What does this last element indicate? The monitoring and supervision we carry out. We need good pearls, namely quality listed firms, and a sufficient number of pearls, indicating the number of firms needed to ensured coordinated reforms, stability and development in all respects. To make the necklace look good every time we wear it, we need a firm and enduring thread, which is symbolic of the foundations of the system and the correct direction of the reform process. The pearl necklaces can be stained by the heavy perspiration especially in summer or if exposed to acid or alkali substances, so we need to clean them carefully and that refers to monitoring and supervision of the capital market in order to protect the legal rights and interests of investors. Because of these aspects, the only yardstick to test the efficacy and correctness of the reforms is whether the capital market is running smoothly.

Whatever the nature of market operation or administrative supervision is, those involved in capital market need to uphold the principle of progressing through stability. From the end of last year onwards, I have talked with many people, including, investors, agents, financiers from security firms, experts and scholars to get an understanding of their thinking. Based on my intuitive view, in the last year, they still expected nothing but stability; however, this year they are longing for some progress while maintaining stability. We calibrate our mission in response to the expectations of progress at our regular work conference that concluded a few days ago, resolving to make critical strides through various efficacious improvements and breakthroughs, especially the building of the systems we planned in cooperation with the players in the capital market.

People's Daily and its website:

Mr. Liu, you mentioned at the 2017 National Securities and Futures Regulation Work Conference that there are no confrontations between the stability of stock indices and the efforts of financing. Many investors are particularly concerned about IPO issues. How do you see relations between IPO and stock indices, and how will you solve what is called the "dammed lake" phenomenon?

Liu Shiyu:

Your question is somewhat sensitive. Certainly some people have worried that the increasing number of IPOs might affect the secondary market. In the past, when the capital market was facing heavy downward pressure, we reduced and even suspended IPOs to try to stabilize the market and ease the downward pressure. Those measures were effective for the moment but failed to be so in the long run. This is because they didn't improve the mechanism for the capital market's stable and long-term development, didn’t address the source of problems in the capital market nor enhance the capital market's ability to serve the real economy.

Surely, at a certain, fixed point of time, increasing IPOs will affect the supply and demand in the secondary market, but it will at the same time improve the average price-earnings ratio. In comparison, when seen over a period of time, the capital market’s fundamental driving force is serving the real economy and sharing its growth. A capital market detached from the development level of the real economy cannot last long. To make it last, there have to be new companies filling in to increase market liquidity and hence attract more capital. When the investment value goes up, the social confidence will enhance, too.

Since last year, the CSRC has been continuously strengthening its communication with the market. The mainstream opinion is that after the abnormal fluctuations, the capital market made a better self-recovery than it was expected, and thus now possesses the conditions to issue more IPOs in a timely manner. As I mentioned just now, the fundamental principle of our work is to respect the market mechanism and rules, and comply with market demand. In light of this, we stepped up IPO supervisions for the capital market and increased the number of listed companies in the capital market.

Evidence has shown that the practice, which was based on market consensus, was popular and durable. Last year, 280 companies were approved for IPO and 248 actually launched IPOs. Not long ago at the work conference in the CSRC system, I said that we had confidence to solve the so-called "dammed lake" problem. "Damned Lake" is a vivid metaphor for many companies lining up for dawdling IPO approvals.

In addition, there seems to be an expectation in the market that the long queue of IPO approvals as well as the sudden IPO of several new companies would send the market index downward. Bearing this in mind, when people see the number of companies waiting for an IPO increase from 500 to 600 or even 700, they tend to be excessively anxious about the secondary market. This is to say the number doesn't matter as much as the psychological effect on the investors.

I mentioned just now that we once suspended IPO when the stock market was moving downward, which twisted the psychological expectations of the market. We spent all of last year managing to correct the twisted expectations. Certainly, the key wasn't in how many companies were approved. Some friends from the press asked why only eight companies launched an IPO this week, whereas in that week, there were 14. I replied by saying that eight plus 14 divided by two is 11. I mean to say it isn't about the number of IPOs we approved but the qualities of companies applying for IPOs.

Last year, we made great efforts to enhance supervision of the soundness of IPO applicants, refinancing, merges and restructuring. We held IPO floaters and sponsors more accountable. Soon after you may see that the CSRC will publish some cases that have a large impact.

Last year, we required brokerages to shoulder their responsibilities in risk management. A total of 90 listed companies and sponsors voluntarily withdrew from companies queuing for IPO approval. It takes the joint effort of all to guard quality. High-quality listed companies would bring capital increments for the market, which is proven as a highly positive correlation.

Certainly, we are more prepared to deal with the "dammed lake" problem. Not only do our two bourses in Shanghai and Shenzhen have a better accommodating ability for new companies, the National Equities Exchange and Quotations (NEEQ) has more and more noticeable functions, ready to play a larger role. The regional equity market has clarified legal status and operation rules, which will help it play a correspondingly active role to solve the equity financing difficulties faced by local small-and-micro enterprises. When standardized merges and reorganizations are also an option, the capital market will have increasingly higher accommodation capabilities to corporate equity financing, resulting in listed companies whose qualities are increasingly higher.

In addition, you could assume another perspective in your way of looking at the number of companies queuing for IPOs. China is a developing major country, meaning that the innovation strategies being implemented will send more and more companies to be listed. This isn't a bad thing, but rather a good thing, because it's a reflection of China's economic vitality, and the source of flowing water for the development of China's capital market.


I have two questions. First, what do you think of the chances China will be included in the MSCI global index this year? My second question is this: the State Council said last year that foreign companies would be encouraged to list on China's domestic stock markets. That’s been said many times in the past. When do you think we will see foreign companies actually listed?

Liu Shiyu:

Thank you for raising these questions. I would like to invite Vice Chairman Fang Xinghai to answer you.

Fang Xinghai:

Thanks for your questions. We will always welcome A-share’s inclusion in the MSCI index. We believe that any emerging market stock index, whether it is the MSCI or any other index, will be very incomplete if there is no Chinese involvement. Whether A-shares are included in the MSCI index or not will be firstly decided by MSCI itself, as it is a business decision. We know there are a lot of commercial interests behind it, and we are willing to jointly discuss this matter with MSCI.

As for your question whether China will be included in MSCI this year, we are still unable to judge this so far. Whether it is included or not, the reform process of China's stock markets, as well as our entire capital market, in the direction of marketization, legalization and internationalization will not change. The pace of reform and opening-up will not change because of an A-share inclusion in MSCI, either. In the course of our discussion with MSCI, they have put forward some requests. Some are entirely consistent with the direction of China's capital market reform and opening-up to the outside world, so we will resolutely promote them. Of course, the pace of the promotion will be determined by development of the Chinese market itself.

Let me give you an example. The current suspension system of listed companies is still relatively inadequately standardized. Overseas investors will worry about this: "I bought your shares, but what if they are suspended and cannot be sold when I want to leave?" In my opinion, this problem should be given some attention and should be solved in an appropriate way. Domestic investors have the same concerns, so we will promote corresponding reform and opening-up policies.

Whether foreign companies can be listed in China means whether foreign companies registered overseas can be listed in China and this involves what is known as an international board. We are still working on this matter.

Some of the reporters here may still remember that, when I was working in Shanghai, I studied with relevant departments of the CSRC about promoting establishment of an international board. However, there are still some technical barriers. Take the accounting standards for example. Among the companies registered overseas, some follow American accounting standards, some follow the accounting standards of the European Union (EU), and some follow other international means. Once they arrive in China, these standards need to be adjusted accordingly and cannot be fully applicable. While changing these standards, we need to consider various factors, including the cost of the changes. So, technical work needs to be done in this regard.

In terms of market regulatory rules, such as information disclosure of listed companies, the practice in China is not the same as foreign countries. So, before an international board is launched, relevant rules of the system need to be adjusted accordingly. All in all, we have been working on this matter, but no timetable has been produced so far.

China Securities Journal:

Just now, Mr. Liu mentioned that the capital market should serve the real economy. We all know that the securities and the fund industries have made significant progress. The CSRC also vows to set up a national team which can represent China’s capital market. My question is: how will the CSRC make efforts to improve the capability and competitiveness of the securities and the fund industries, in order to serve China’s real economy. Thanks.

Liu Shiyu:

I’d like to invite Mr. Li to answer this question.

Li Chao:

Thank you for your question. By the end of 2016, China has 129 security companies with total assets of 5.8 trillion yuan (US$843.48 billion). The net assets have reached 1.6 trillion yuan (US$232.65 billion), buyout capital reached 1.47 trillion yuan (US$213.74 billion), and net profits have reached 123.4 billion yuan (US$17.94 billion). There are 109 fund companies with total assets of over 170 billion yuan (US$24.71 billion) and net assets of 110 billion yuan (US$15.99 billion). The assets managed by the securities and the fund industries reached 43 trillion yuan (US$6.25 trillion), among which publicly offered funds surpassed 9 trillion yuan (US$1.3 trillion), while private placement reached over 30 trillion yuan (US$4.36 trillion). Generally speaking, the securities and the fund industries enjoy abundant capital, and their capability and level of risk prevention and asset management have improved a lot.

In 2016, securities companies have provided professional services for a total of 7.5 trillion yuan (US$1.09 trillion) of stock, stock rights, bond and other financing. Currently, there are nearly 200 million publicly offered fund holders, more than 85 percent of them hold assets less than 50,000 yuan (US$7271.03). In terms of rate of return, since the open publicly offered fund was released in 2001, the rate of return for stock-leaning funds had reached 16 percent, while that of bond funds had reached over 8 percent, which provided 1.5 trillion yuan (US$218.13 billion) profit for fund holders. Actually, all the data above are average numbers, reminding us to avoid short-term runs. In this area, fund holders can learn experience from social security funds in terms of investment philosophy and asset allocation.

In addition, securities and fund organizations serve the Belt & Road Initiative and support countries along the route to issue Renminbi bonds. Meanwhile, the industry also serves the government’s strategy of poverty alleviation. Currently, more than 80 securities organizations are providing their help to over 130 national-level poverty-stricken counties.

The abnormal fluctuation in the stock market in 2015 set off an alarm bell for both the entire industry and the supervision department. It made us rethink the deficiencies existing in supervision mechanism and philosophy.

From 2016, the CSRC has insisted on overall strictly supervising according to law, and has made efforts to improve the supervision system. We will reinforce law enforcement efforts and strictly deal with those unlawful acts. In 2016, we carried out over 200 administrative supervision measures, not including administrative penalties, which involved dozens of the securities and the fund supervision organizations and related administrative officers and employees.

Next, we will stick to the overall position of CPC Central Committee and State Council, to hold the right supervision philosophy, so as to avoid systematic financial risk.

Bloomberg News:

Thank you. I’m with Bloomberg News. What are China’s plans to further open capital markets to foreign investors in the year ahead? And in your conversations with foreign investors, what do you find are their main concerns about investing in China’s capital markets and how does CSRC plan to address those concerns? Thank you.

Liu Shiyu:

Mr. Fang Xinghai will answer this question.

Fang Xinghai:

The foreign investors you mentioned are mainly from two groups. For overseas institutional investors who are willing to invest in the Chinese stock market and Chinese bond market, they can enter into the Chinese market through QFII and other mechanisms, including the Shenzhen-Hong Kong Stock Connect and Shanghai-Hong Kong Stock Connect. For overseas service providers, including securities traders, fund management companies and futures commission merchants, how can they enter into the Chinese market and provide service? First of all, our capital markets, especially the security and futures markets under the management of CSRC, welcome foreign investors and service providers to start business in China. The foreign shareholder's highest equity ratio can reach 49 percent in joint-venture securities, fund management companies and futures commission merchants. Private equity management can be run by foreign capital solely. Under the framework of CEPA between mainland China and Hong Kong, securities traders from Hong Kong can enjoy more discounts in mainland China. It is aimed at boosting the development of Hong Kong and strengthening Hong Kong’s position as an international financial center.

According to the deployment of the CPC Central Committee and the State Council, we will take some measures to encourage overseas institutional investors to participate in Chinese securities and futures markets in joint ventures, including a measure of the gradual improvement of the overseas shareholders’ highest equity ratio in domestic securities and futures companies, for a better future of domestic securities and futures markets.

In addition to the principle of opening up the capital market at China’s own pace, there is also a principle of promoting two-way opening under the framework of bilateral or multilateral international agreements on the basis of equity. We have been boosting two-way opening. For instance, as you know, China is undergoing negotiations with the United States and the EU in bilateral investment agreements. We are willing to boost the two-way opening and widen the opening up under such framework.

Xinhua News Agency:

The CSRC is now revising the regulation on listed company management. How will the CSRC take into consideration the leadership of the Party in the process? How to coordinate the two aspects effectively? Can you tell us about this in detail? Thank you.

Liu Shiyu:

The leadership of the CPC has stood the test of our people and history. The PRC’s Constitution clearly stipulates that the leadership of the CPC is the core feature of the socialism with Chinese characteristics. Article 19 of the Company Law states clearly the responsibilities of Party organizations towards companies. I hold that the Party organizations will shoulder different responsibilities in regard to companies with different ownership structures. At State-controlled listed companies, the Party committee forms the political and leadership core; at private listed companies, it is necessary to implement the rules of the Party, guarantee the rights of Party members, and give full play to the roles of Party organizations and members.

Maybe you have noticed that the CSRC severely punished some listed companies last Friday. No matter what kind of ownership is involved, a listed company should follow the fundamental political system in China and abide by its laws. Listed companies have to be responsible for the interests of shareholders, the society and the nation, and so should surely be under stricter supervision.


President Liu, as you have just mentioned, people are very concerned with the National Equities Exchange and Quotations (NEEQ). How will the CSRC promote the construction of a multi-level capital market system? What kind of new measures will be implemented on the reform of NEEQ and regional equity markets?

Liu Shiyu:

I’ll give the floor to our vice president Zhao Zhengping, who’s in charge of the issue.

Zhao Zhengping:

Firstly, thank you for your concern about the construction of the multi-level capital market. The Chinese capital market structure includes stocks, bonds and derivative products; the stock market with multi-level features includes the exchange, the NEEQ and regional equity entities. In the past two years, and especially last year, the NEEQ market developed rapidly with over 10,000 listed companies. Actually, up to February 24, the number had reached 10,715. With so many listed medium, small and micro businesses, we have had to improve the financing structure, enhance brand value and promote investment of social capital in start-ups. The equity financing volume of NEEQ listed companies so far totals 290 billion yuan, as President Liu mentioned. Last year, the figure was 139 billion yuan. Hence, this has resolved many financing difficulties for medium, small and micro businesses. The NEEQ market, being an important part of the multi-level market structure, still has further great potential in assisting innovative, start-up and growing businesses.

The regional equity market is also an important component of the multi-level capital market. Confined to the provincial administrative region where it is located, the regional equity market serves as a private equity market for local medium, small and micro businesses. Until now, there have been 40 regional equity markets established with a listing of 16,000 companies and a further 58,000 demonstration companies. The financing volume has reached 680 billion yuan.

Through our joint efforts, we hope we can turn it into an incubator for medium, small and micro businesses, an important channel for equity financing, and a comprehensive platform that medium, small and micro businesses will receive support from local governments so as to ensure that the capital market serves businesses and the real economy in a better way. Thank you.

Futures Daily:

Mr. Liu, good morning. The prices of some commodity futures, especially coal, steel and coke, witnessed great fluctuations last year due to the liquidity shock, which attracted widespread attention. The CSRC issued a series of measuresensuring stable operation of the commodity futures market in 2016. We noticed recently that the prices of rebar and iron ore futures have edged close to a record high. I wonder what does the CSRC have in mind in managing the commodity futures market this year? And, how will the CSRC further promote the reform and development of China’s commodity futures market so as to better serve the real economy? Thank you.

Liu Shiyu:

I will ask Mr. Fang Xinghai to answer your question.

Fang Xinghai:

This is a broad question. The trading of coal, steel and coke were quite active last year, and prices fluctuated greatly. This is due to a number of reasons. First, China wanted to slash production capacity last year. Second, the property market was active, leading to demand outstripping supply. Moreover, speculative capital constitutes a large part of China’s financial system. Speculation arises for two reasons: hype and the capital needed. The coal, steel, and coke futures market last year displayed the two factors, therefore, we saw a flood of speculative capital last year.

We managed to reduce the overheated trade volume last year as we adopted the following measures: increasing transaction costs, properly increasing the requirements for a cash deposit, tightening the position limits of some speculative accounts, and forbidding illegal accounts from trading and carrying out related investigations. The general idea was that the market did not need any unreasonably heated trading, and the futures market should be allowed to play its inherent role. We are satisfied with the outcome of last year’s management exercise, as trading overall was stable and the future prices were lower than spot prices.

We plan to operate some new features this year, such as option trading of agricultural products. We are also preparing for the introduction of crude oil futures, hoping it will be launched as soon as possible. We will step up efforts to make more trades available. In terms of transaction supervision, we will adhere to last year’s principles, namely, we don’t need overheated trading, but will pay more attention to pricing and seek to attract more industrial customers. Meanwhile, we will also further internationalize the futures market, that is to say, seeking more overseas customers to enter China’s futures market.

Lianhe Zaobao:

My question is about IPO. Recently, I heard that CRSC planned to help some local financial technology (Fintech) enterprises by making it easier to go public in the Chinese mainland market. Is that true? What are the specific methods? My second question is: since many Fintech enterprises do find it hard to go public on the Chinese mainland, they prefer the U.S. market to go public. How can you compete with overseas exchanges and encourage more Fintech enterprises to launch their IPO here?

Liu Shiyu:

Where to go public is, of course,an enterprise’s own choice, and the CRSC respects such choices. Public launches overseas can be supervised, and that is beneficial for overall enterprise governance, which is a good thing. Related systems in the Chinese capital market are being modified. For example, enterprises that want to launch an IPO on the Main Board should at least show three consecutive years of profit; however, most Fintech enterprises find it hard to meet such requirements. Currently, the Growth Enterprise Market and the NEEQ also face this situation. Investors like to share the achievements of those technology-based and Fintech enterprises, while also sharing the risks they may face.

As for you mentioned, about the competition between us and the New York Stock Exchange, or the Singapore Exchange, actually speaking, we are different examination rooms although using similar questions but different languages. For those enterprises going public overseas, they also have responsibilities because to some extent they represent China’s national image. Currently, there is only cooperation, but no competition between us and those foreign exchanges. I’m very confident about the development of the Chinese capital market, so I believe competition will emerge someday. Thank you.

China Business Network:

Last year, you warned some institutional investors not to become “barbarians.” You also said that you will punish the "financial crocodiles" at the beginning of this year. I wonder who the “barbarians” and "financial crocodiles" are. Thanks.

Liu Shiyu:

First of all, the top priority of the CSRC is supervision. This is its clear and unshakable role. Through supervision, that is to say, through legal, comprehensive and strict supervision, we can maintain an open, fair and just market order. Without these principles of openness, fairness, and justness, there can be no protection for investors’ rights. Without an open, fair and just market order, there is no effective protection for small and medium investors’ legal rights.

Secondly, I have spent long time to investigate the different forms of chaotic behavior in the capital market after I came to the CSRC and I feel a sense of shock. I wanted to find some simple, proper and comprehensible words to cover this chaos I found. I did not create these words -- the “barbarian,” “demon,” “pests” and "financial crocodiles" you mentioned. These people’s behaviors usually take place under a cloak of legitimacy; however, they are hurting the legal rights of the small and medium investors. The function of the CSRC is supervision. Can we just sit idly by?

Third, the temptation of big money is a huge issue for the financial market. There is only a slight margin in approach that differentiates an angel and a devil. It is just half step away from the gap between a financier in capital market and a "financial crocodile." Any transaction in capital market is recorded, including the earliest transactions calculated by an abacus. With the application of modern technology, especially the use of big data and cloud computing, any behavior, which is illegal, harmful to the small and medium investors, and destructive to the market order, taken by any individual or any institutional investor at any time is recorded. We will continue to rely on these past and current records. I reiterate that institutional investors in the fund industry should not become “barbarians,” “demons” and “pests.” I said we will investigate the "financial crocodiles" who hurt the rights of small and medium investors, but what I said focuses on behavior. However, we cannot presume that this or that person is behind the behavior, because there is still a long way to go. We need to investigate various clues and analyze the data to find out who is responsible.

You asked me who are the “barbarians,” “demons,” “pests” and "financial crocodiles," if I told you, I would be prejudging my future investigation. Thanks.

Hu Kaihong:

That's all for today's press conference. Thank you.

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