China introduces stringent regulatory reforms to bolster stock market integrity

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12th April 2024 – (Shanghai) The China Securities Regulatory Commission (CSRC) unveiled new draft regulations on Friday aiming to bolster the robustness of the Chinese stock market and enhance investor protections. This comprehensive regulatory overhaul includes stricter criteria for listings and delistings, and more rigorous controls on quantitative (quant) trading practices.

In response to the market’s dip to a five-year low in February, the CSRC’s proposals are part of a broader strategy to restore investor confidence and improve the quality of the market’s offerings. The draft rules propose enhanced operational and profitability benchmarks for companies aspiring to list on the main board and the technology-centric ChiNext board. Additionally, the CSRC plans to expand its on-site inspections of companies awaiting initial public offerings (IPOs) and the intermediaries involved.

The CSRC has pledged to rigorously audit the delisting process, ensuring that companies failing to meet the required standards are promptly removed from the market. This move is intended to cleanse the market of underperforming entities and safeguard investor interests.

Moreover, the regulations set forth stricter differentiated requirements for high-frequency trading to ensure market fairness. These include additional reporting obligations and variable fee structures, aimed at curbing potential manipulations and maintaining trading order.

The proposals also extend to enhancing transparency and uniformity in monitoring transactions involving both domestic and international capital, ensuring all market participants are subject to equivalent scrutiny.

These regulatory adjustments arrive amid broader state efforts to fortify the market against risks and promote high-quality development, as outlined in a recent policy document by China’s cabinet. The guidelines project an ambitious vision for China’s capital market, anticipating significant improvements in corporate governance and market structure by 2035.