As a major step in this regard, the Securities Association of China (SAC), a non-government watchdog of China's securities industry, has given the greenlight for foreign securities institutions to become its members.

Zhuang Xinyi, the newly appointed chairman of SAC, who revealed this, said in Beijing Wednesday: "The membership would promote their communication with their Chinese counterparts and facilitate cooperation."

So far, the membership is open only to domestic securities houses, fund management and securities consulting companies.

Foreign institutions are expected to bring more advanced expertise and management to China's securities industry, said Zhuang.

"Domestic securities firms should consolidate their ties with their foreign counterparts and learn more."

The would-be foreign members must acquire a licence from the Chinese Government to do securities business in the country and be registered in China, he said.

A number of foreign financial institutions are in talks with domestic securities and fund management firms concerning the launch of the first-batch of Sino-foreign securities and fund management firms.

The SAC is opening its door to foreign securities firms at a time in which it is assuming more regulatory roles in the stock market.

Top of its agenda is a plan to build up a database of information on employees of the securities institutions and their business records.

The database will record the misconduct of individuals and companies, which can be made public if necessary.

This will help build the creditability of the securities institutions, and serve as a warning to rule-breakers who used to get away with no punishment in the past because investigations of irregularities were often time consuming as a result of a lack of evidence.

To cite some of its other new tasks, the SAC is going to assess and grant qualifications to people working in the securities sectors, set up professional and ethical standards and organize training programs.

Such functions used to be shouldered by the government, said Zhou Xiaochuan, chairman of the China Securities Regulatory Commission (CSRC).

"But they should be transferred to SAC in the market-oriented reforms," he said.

He said recently that great changes would take place concerning the transfer of functions of CSRC. The commission's information center has already been transferred to SAC.

Zhuang pledged to improve services of his association, especially in setting up new industrial ethical and self-discipline rules.

He also said domestic securities companies should set up a foothold outside the country to join the competition in the foreign market. But they need to first improve management and standards and pace up innovation, he said.

Optimism that a more open stock market in China and subsequent investment opportunities will emerge was expressed by David Lin, chief representative in Shanghai of the Taiwan International Securities Corporation. He hoped that Taiwan securities companies would be allowed to do business on the mainland.

(China Daily July 4, 2002)