In some respects, these figures indicate that great changes have taken place in China’s securities market over the past decade. Starting from nothing, the securities market is now of crucial importance to China’s economy as whole. The foreign media has made such remarks as “it has taken only 10-plus years for China to achieve developments that took developed countries over a century to attain.”

At the beginning of the 1990s, when joint-stock systems and the securities market were first introduced, many Chinese were still suspicious of their characteristics -- whether it was the product of Capitalism or Socialism. Nowadays, people realize that joint-stock systems are an advanced management technique, which reflect modern socialized production laws. China’s securities market, meanwhile, has become one of the most vigorous markets in the world.

China began its trial in Shenzhen and Shanghai ten years ago, though the two newly established securities markets were of relatively insignificant size and had little influence at that time. Once the Central Committee of the Communist Party of China and State Council extended the stock issuance system nationwide in October 1992, a lot of enterprises went public after relevant reforms were approved, and listed companies spread throughout every province, municipality and autonomous region.

With the update of trading systems and telecommunications facilities, security transaction networks have quickly spread all over the country, attracting greater numbers of investors. Through the support of government, the number of institutional investors has risen, significantly improving the investment structure. In addition, 19 fund management companies were established one after another, holding total assets of 100 billion yuan (US$12.1 billion). Institutional investors have now become the stabilizers of the securities market, while the notion of rational investment has taken root in the minds of many people.

The strengthening of securities brokerages can be demonstrated through the following statistics. In 1992, there were only three national securities companies with total registered capital of 1 billion yuan (US$121 million). By the end of June this year, there were 118 security companies, 22 of which have registered capital of over 1 billion yuan (US$121 million), 2,700 business departments and over 100,000 employees. Relevant industries, such as accounting practices, law firms, evaluation and consulting organizations, have also developed quickly. Meanwhile, the development of securities brokerage houses has further promoted the securities market.

Currently, bonds, mutual funds as well as stocks are all open to trade on the market. The B share market has begun to expand, and H share, N share and S share markets have been created in succession. In addition, China’s securities authority has strengthened exchanges and cooperation with its counterparts in other parts of the world.

The securities market is playing an increasingly important role in raising capital, optimizing resource allocation and rectifying the country’s economic structure. After a decade of operation, laws and regulations have confirmed the importance of a joint-structure system, which has further boosted the reform of state-owned enterprise (SOE). Information disclosure system, board member credit liability system and transparent accounting rules, which are required by the securities authority, have indirectly promoted corporate structure adjustments and the establishment of modern enterprise systems. The securities market also activates private capital, boosts the private economy and accelerates China’s opening-up.

The Securities Law of the People’s Republic of China, promulgated on July 1, 1999, sets a milestone of standardization for China’s securities market. With the establishment of over 300 relevant laws, regulations and provisional rules, China has now set up a preliminarily legal system, covering securities, future exchanges and funds, forming the core of Corporate Law and Securities Law. It has secured the interest of stock investors, market orders and promoted healthy development.

The vertical integration of the national securities markets has increased the efficiency and authority of securities watchdogs. Based on the principle of market-oriented supervision, the stock issuance verification system has replaced the former examination and approval system, and the delisting system taken the place of the earlier PT (Particular Transfer) system.

The next one to two decades will be crucial for China’s securities markets. The securities markets will embrace a bright future only if they standardize market developments.

(China.org.cn by Tang Fuchun, November 9, 2002)