The "Several Opinions on Strengthening Supervision to Prevent Risks and Promote High-quality Development of the Capital Market" issued by The State Council on April 12 (hereinafter referred to as the "Opinions") has attracted market attention and is known as the new "National nine".

Compared with the previous two "National nine", this "Opinion" mainly shows three characteristics: first, the focus of capital market construction focuses on the equity market; Second, the policy focus from market cultivation to improve the quality of listed companies; Third, special attention is paid to protecting the rights and interests of small and medium-sized investors and the sense of investment gain in the capital market. From these policy focus points, it can be seen that the government intends to open up the demand side and the supply side of equity market funds to better help the development of new quality productivity and serve the major national strategy.

Based on equity market

Open up the capital demand side and the supply side

Equity market is an important financing channel for new industries, new forms of business and new technologies, and is of great significance for the construction of modern industrial system. By the end of 2023, the total market value of A-shares was 77.6 trillion yuan, while the total assets of banking financial institutions exceeded 400 trillion yuan. Although its scale is more than five times that of the equity market, due to the risk appetite of the banking system itself and other reasons, relatively high-risk scientific and technological innovation enterprises have limited credit support, and equity financing has become a better choice. Therefore, this "Opinion" based on the equity market, in the capital demand side, focus on improving the quality of listed companies, optimize the structure of listed companies, and help economic transformation.

On the supply side of funds, the policy is intended to further boost market confidence by allowing a wider range of investors to share the fruits of capital market development. In the overall requirements of the Opinions, the word "people" is mentioned three times. This is not only because of the political concept of finance for the people, but also because in China's stock market, individual investors account for the highest proportion, and protecting small and medium-sized investors is also an important part of ensuring market capital supply and liquidity. Although the proportion of institutional investors' holdings and transactions in the A-share market has steadily increased in recent years, individual investors' transactions still account for about 60%. In addition, the number of personal investment accounts exceeds 200 million, accepting the wealth management needs of a large part of the people. Therefore, in order to serve the supply side of funds, this "Opinion" also specifically emphasizes the need to strengthen supervision to prevent risks, protect the legitimate rights and interests of small and medium-sized investors, increase the dividend rate, strengthen the supervision of cash dividends, guide the investment return orientation of public funds, and improve the people's sense of gain.

Enterprise as the core

Cultivate market ecology

Listed companies, as investment targets, are the cornerstone of the capital market, and their quality directly affects the high-quality development of the stock market. Therefore, the supervision system is also centered on enterprises, compacting corporate responsibility, focusing on various links from listing access, supervision of listed enterprises to delisting system, and strictly controlling the quality of listed companies.

In the listing access stage, not only the listing threshold is raised, the intensity of regulatory inspection is increased, the quality of listed companies is controlled from the source, and the structure of listed companies is further optimized as an opportunity. For the minimum listing standard of net profit in the latest year, the main board is prepared to increase from 60 million yuan to 100 million yuan, and the GEM is raised to 60 million yuan, while the financial conditions of the Science and technology board and the Beijing Stock Exchange remain unchanged. In this way, the plate level is not only more distinct, but also can promote more allocation of market resources to key areas such as scientific and technological innovation.

For listed companies, it is not only necessary to continue to ensure the authenticity and accuracy of information disclosure and eliminate financial fraud, but also requires listed companies to make more efforts in improving investment value and reducing investment risks. In terms of market value management, the "National Nine" in 2014 only proposed to "encourage listed companies to establish market value management system"; This "Opinion" directly requires the regulatory authorities to formulate relevant guidelines and study the inclusion of market value management in the assessment and evaluation system, and the attitude is more resolute. In terms of shareholding reduction rules, the Opinions further improve the shareholding reduction rules of major shareholders, prevent detour of shareholding reduction, and protect the interests of minority shareholders by regulating the behavior of major shareholders.

In addition, the "Opinions" also for the first time put forward dividend requirements for listed enterprises, the investment return is mainly based on the bid-ask spread, and the share price appreciation, dividend dividends and even buyback cancellation are carried out at the same time, in order to improve the stability and predictability of shareholder returns. In the setting of specific rules, attention should also be paid to avoiding "one-size-fits-all" and differentiated treatment of enterprises in different sectors and different life cycles according to local conditions. The Securities and Exchange Commission specially for this additional explanation, for the science and technology board and GEM research and development intensity or research and development investment of large enterprises, can exempt enterprises that do not meet the dividend conditions are ST. In addition, the Opinions also support enterprises to enhance their strength and enhance their intrinsic value through mergers and acquisitions.

The delisting system is more full, not only strictly mandatory delisting standards, but also clearly improve relevant policies and further open the channel of active delisting. The supporting policy of this time is clear, listed companies can be privatized through tender offers, resolutions of shareholders' meetings and other ways, on par with mature capital markets such as Hong Kong; At the same time, it supports the absorption and merger between listed companies, and encourages the head company to carry out industrial integration of listed companies in the industrial chain based on the main business, and become bigger and stronger. Compared with the free market idea of "respecting the independent decision-making of enterprises" in 2014, this time more emphasis is placed on the capital market serving the real economy and avoiding blind expansion. In this process, it has also focused on strengthening restructuring and acquisition supervision, and reducing the value of "shell" resources. In summary, the "Opinions" support industrial mergers and acquisitions and even the integration of listed companies along the industrial chain.

Strengthen supervision

We will improve our ability to govern the capital market

In addition, to create a good capital market ecology, the Opinions are also bound to put forward new requirements for all participants in the market. For intermediaries, they should emphasize their "gatekeeper" duties, reduce the information asymmetry between enterprises and the market, and ensure good access. In particular, the requirements and supervision of securities companies have become stricter, emphasizing their functionality rather than profitability. In addition, institutional investors are an important source of long-term stable funds for the market. Encouraging public funds, index funds, insurance funds, social security funds, bank financing and other long-term funds to enter the market, not only can reduce the stock market volatility similar to last August, but its investment strategy also has a certain screening effect on listed enterprises, which is conducive to the stable and healthy development of leading enterprises.

Most importantly, the "Opinions" also show the regulatory level of its own system of systematic thinking and knife-edge inward reform determination. As early as March this year, the CSRC has formulated and introduced four documents, respectively, on listing access, supervision of listed companies, supervision of securities companies and public funds, and the construction of the CSRC system, made exploration. On the day of the release of the "Opinions", the CSRC also issued supporting policy documents to strengthen delisting supervision, and publicly solicit opinions on six specific system rules, showing a complete "1+N" regulatory policy system. Behind the combination of these policy documents, there is actually a complete and self-consistent logical chain, which helps to systematically improve the modernization level of capital market governance capabilities and create a good market ecology. Regulation, of course, is a tool, not an end. In the actual construction of the regulatory system, the relevant departments should also seriously consider how to combine China's national conditions with the general laws of the capital market. In the implementation rules, we should also beware of excessive administrative intervention in business level issues, or the risk of distortion in the actual implementation of policy intentions.

All in all, the central financial work Conference put forward the goal of "financial power", the key is "strong", rather than "big". Therefore, we hope that the launch of this series of policies can promote the improvement of the current system and mechanism problems in the market, help the construction of the capital market with Chinese characteristics, and serve the transformation and upgrading of the national economic structure.

(Huang Sheng is Professor of finance at China Europe International Business School and Director of the China-Europe Center for Enterprise and Capital Markets; Sun Xi is an Assistant Research Fellow at China Europe International Business School)