China to Push Their Plans to Implement Broader Capital Market Reforms
China pledged to push ahead with their plans to implement a broader range of capital market reforms as the country seeks to encourage a more efficient capital allocation, improve transparency and increase foreign investment in the markets. During a wide ranged statement of policy principles, the State Cabinet promised that they will develop a system for direct bond issuance from local governments, remove several restrictions on the use of financial derivatives and streamline approval process of IPOs.
As the government discussed the many reforms that were mentioned by the State Council, the decisions made signals a new commitment in pushing ahead with the planned proposals as st Securities Association of China issues new rules that governs IPOs. Quotas will also be increased for outward and inward foreign investment under the Qualified Foreign Institutional Investor and Qualified Domestic Institutional Investor programs. Although the capital markets in China are still not mature and several problems exist, and newer problems arises.
The State Council will be setting out goals and principles in its new policy making process which will leave out relevant agencies such as the China Securities Regulatory Commission, the China Banking Regulatory Commission and the People’s Bank of China to follow up with specific regulations. The State Council will also create a system for direct bond issues by local government which is currently forbidden from directly selling bonds from borrowed from banks but passed the ban by borrowing from special purpose vehicles.