The following is based on a series of speeches from Guo Shuqing, former Chairman of the China Securities Regulatory Commission, held between May 2012 and January 2013.
China has a high savings rate
- unreasonable valuation (namely P/E ratio) of equities;
- insufficient diversification of listed companies’ shareholders;
- lack of market integrity and legal awareness among market participants (for example insider trading and market manipulation);
- substantial volatility;
- over-dependence on indirect financing (80 %) as opposed to direct financing (20 %);
- slow development of Chinese bond markets (Stock markets are 4.5 times bigger.);
- underdeveloped derivatives market;
- abundance of financial resources for large and government-backed firms and lack of financing for small and middle-sized enterprises.
- focus on the needs of the real economy;
- introduce market-oriented reforms of interest and exchange rates to allow suitable pricing of financial products;
- decrease market entry regulation and, at the same time, increase business activity regulation once you have entered the market;
- open up Chinese financial sectors to the outside world to enhance efficient control of profitability by foreign competitors.
- encourage long-term investment through appropriate tax policies;
- deepen IPO and delisting reforms to curb speculation and allow a good interplay between primary and secondary markets;
- create incentives for listed companies to pay out dividends;
- strengthen law enforcement in securities markets.