Charting the Course to Develop Distinctively Chinese Modern Capital Markets

After more than 30 years of reform and development, especially since the 18th CPC National Congress, China has entered a new stage of developing distinctively Chinese modern capital markets. To achieve this, we must fully and faithfully apply the new development philosophy on all fronts, continuously deepen our understanding and practical grasp of the principles governing modern capital markets, and strive to create standardized, transparent, open, dynamic, and resilient capital markets.

We will uphold the CPC's overall leadership over capital markets to ensure that our development remains on track. Our Party's leadership is the most essential element of socialism with Chinese characteristics and a fundamental guarantee for China to develop distinctively Chinese modern capital markets. We must better combine the political and organizational advantages of the Party's leadership with the general principles governing the development of capital markets and stand firmly with the people regarding capital market supervision. We must also adhere to and strengthen the Party's leading role to achieve practical results in serving the real economy, preventing and containing financial risks, and deepening financial reform, as well as to facilitate high-level sci-tech, capital, and industry flows. We need to create an atmosphere in which the CSRC can systematically enforce rigorous Party self-governance and ensure officials dare not, cannot, and will not engage in corruption. We should comprehensively strengthen full-process oversight of and checks on the exercise of public power, tighten the supervision of integrity in the industry, and create clean and healthy capital markets.

We will uphold the principle of seeking truth from facts and commit to developing distinctively Chinese capital markets. During several centuries, Western countries have gained a wealth of experience in developing capital markets, from which China should learn in an open-minded and pragmatic manner. We should not forget, however, that China is seeking to develop capital markets under a socialist market economy, so the development path and functions must be compatible with the basic socialist system and take into consideration the current state of China's market foundations, investor structure, and legal and ethical environment. In recent years, the CSRC has adhered to the three principles of respecting the registration-based IPO system, learning from the best practices abroad, and embodying Chinese characteristics and the features of China's development stage. We have successively piloted the registration-based IPO system in the STAR Market, ChiNext, and the Beijing Stock Exchange. While adhering to common international practices, such as prioritizing information disclosure, increasing the responsibilities of intermediaries, and promoting market-based pricing, we have made unique institutional arrangements to balance primary and secondary markets, realize complementary development between capital markets, and protect investors. We must always adhere to the principle of seeking truth from facts and explore boldly but settle on solutions carefully. Viewing the reform of the registration-based IPO system as an opportunity, we will continue to reform the capital markets in an all-round manner and strive to find a development path for capital markets that suits China's national conditions.

We will remain market-oriented and law-based to create a stable, transparent, and predictable development environment. Capital markets have extremely exacting standards and requirements, and we need to uphold the overarching plan of "system building, nonintervention, and zero tolerance." We need to abide by market laws, respect the spirit of contract, and deepen reforms to streamline administration and delegate power, improve regulation, and upgrade services. We also need to utilize the market's decisive role in resource allocation and make better use of the role of government. It is particularly necessary that we grasp the features and behavioral principles of capital to achieve its well-regulated and healthy development. We must understand the political and people-oriented aspects of capital market supervision, manage access to capital markets, and work with relevant parties to establish sound institutional mechanisms to prevent the disorderly expansion of capital in order to create a market environment that enables fair competition. Strengthening supervision of securities and the financial industry requires us to set out clearly practices that are acceptable and unacceptable, reaffirm our commitment to the development of both the public and non-public sectors of the economy, and promote the development of business entities under all forms of ownership. It also requires us to protect property rights and intellectual property rights in accordance with the law, stimulate entrepreneurship and market innovation and creativity, and better guide capital to serve the socialist market economy.

We will strive to develop a new governance model consisting of public contributions, joint participation, and common interests. Capital markets are environments with complex mechanisms. Only by balancing current and future concerns and overall and partial interests, as well as strengthening our functions through institutional reform, structural optimization, and market environment improvements, will they benefit the real economy. This requires us to adopt an overall perspective, which means actively strengthening coordination with fiscal, taxation, monetary, and industrial policies while regulating capital markets well, and to unleash the enthusiasm of central and local governments. We must also strengthen concerted efforts to introduce medium- and long-term funds, improve the quality of listed companies, encourage greater openness to the outside world, and crack down on securities violations to create a positive market environment.

We will find the right balance between reform, development, and stability to create stable and sustainable capital markets. Stability is essential for capital markets to function normally, and it is the basis for advancing reform and serving the real economy. Stock markets fluctuate as a matter of course, and it is not appropriate for, nor is it the job of, government to intervene in routine fluctuations by spending to shore up index funds. Non-intervention is not laissez-faire, however. We will also be mindful of worst-case scenarios and prevent market failures causing abnormal fluctuations. This requires us to ensure that no systemic risks occur and take well-balanced approaches. We must also be aware that stability in capital markets is born out of reform, not the status quo, so we must remain committed to stimulating market vitality through reforms and bolstering market resilience and endogenous drivers of high-quality development.