The China Series - Part 2 : Regulation and Enforcement
November 27th 2006 04:23
An Overview of China's Stock Market
Part 2 - Regulation and Enforcement
Part 2 - Regulation and Enforcement
Introduction
Part 1
The China Securities Regulatory Commission is the stock market regulatory body in China, equivalent to the Securities Commission in the USA or the ASIC (Australia Securities and Investment Commission) . The CSRC, is recognized as the most professional and progressive of all central government agencies (Green, 2003) Yet the reservation must be made to recognize that the commission is still ultimately controlled by the Communist Party’s Central Committee. The issues of judicial and enforcement independence come into question as whether impartiality is observed when executing the rules and regulations against fraud or misconducts.
As majority of the listed firms are restructured SOEs, ultimately they are still under the control of political circles or in other words, strongly suggest, under political protection. As the CSRC final authority being the ruling party and the listed firms under the grace of the government, over time, conflict of interests arise which therefore usually lead to cover up even though the commission have the noble objectives of ensuring fair play is observed in the market.
As mentioned in the Part 1, journalism plays a role in the set of soft infrastructure, the Chinese financial press is increasingly being observed as pushing the barrier with in-dept investigative journalism into frauds or malpractices that prompt the CSRC to launch investigation themselves. One of the prominent presses in such category is the Caijing (Economics and Finance) magazine with a series of major stories and campaigned for better regulation.
If the Chinese stock market continues its path at the present state, it will be no doubt, a time bomb waiting to explode but the myriad of problems is apparently recognized and resolving attempts are in fact underway. As of April 2005, the CSRC launched reforms to solve the separate share structure, which was recognized as the biggest problem restraining the development of its stock market. The aim of the reform is to maintain market stability and protect the legitimate interests of investors .
The reforms indicate the level of willingness and urgency to rectify regulatory and market efficiency problems as it had the approval of the National People’s Congress (Chinese parliament) in a bid to lay a sound and solid legal foundation for the securities sector.
The Shenzhen Stock Exchange
Coming Up Next: Performance and Efficiency
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