Interview With Zhao Xijun, CO President Of China Capital Market Research Institute

On the occasion of the 40th anniversary of the establishment of Shenzhen Special Economic Zone, the general office of the CPC Central Committee and the general office of the State Council issued the "comprehensive reform pilot implementation plan for Shenzhen to build an advanced demonstration zone of socialism with Chinese characteristics (2020-2025)", which proposes to support Shenzhen to take the lead in capital market construction. We will promote the reform of the growth enterprise market and pilot the registration system, and pilot innovative enterprises to issue stocks or depository receipts (CDR) in China. We will establish a mechanism for companies listed on the new third board to be listed on the second board. We will optimize the market access environment for private equity funds. We will explore and optimize the market access and development environment for venture capital enterprises.

On October 14, the Shenzhen Stock Exchange said it would firmly shoulder the responsibility of taking the lead in the capital market and unswervingly deepen the reform and expand the opening up in the next step. Taking the opportunity of the gem reform and the pilot registration system as an opportunity, we will further promote the implementation of the key tasks of comprehensively deepening the capital market reform and the list of the first batch of authorized items in the pilot demonstration area, actively serve the construction of Guangdong, Hong Kong and Macao Bay area, and promote the high-level circulation of science and technology, capital and the real economy. Learning from international best practices, we should promote the construction of an international system of rules and regulations, and further enhance our competitiveness, open supervision and risk prevention and control capabilities.

The development of China's capital market has been constantly marketization. From the approval system, the approval system to the registration system, from the main board, the small and medium-sized board, the gem to the science and technology innovation board, from the stock market, bond market to futures and derivatives market, China's capital market products, scale and structure are increasingly in line with international standards. Now, as China's capital market is in its thirties, southern finance and economics full media reporter interviewed Professor Zhao Xijun, academic member of the Institute of International Monetary Studies (IMI) of Renmin University of China and co president of China Capital Market Research Institute, on issues related to the construction and development of Shenzhen capital market.

Construction and operation of Shenzhen comprehensive reform and integration system

Nanfang finance and Economics: how to evaluate the orientation and significance of Shenzhen's comprehensive reform plan to support Shenzhen in the construction of capital market?

Zhao Xijun: judging from the arrangement of the capital market reform in the comprehensive reform plan of Shenzhen, the orientation it actually emphasizes is to make the capital market better serve the economy, innovation, especially the growth and development of high-tech enterprises. All the reform measures in the whole plan are actually around this. This comprehensive reform plan has a lot of arrangements for Shenzhen to further deepen the reform of the capital market, from system construction to practical operation. For example, the reform of the registration system of the gem is actually a problem of system construction. In August, Shenzhen's GEM has officially launched the registration system reform. In addition, there are also applied things, such as the attempt to issue CDR. It can be said that it involves institutional arrangements, but it is more of a financing product with corresponding open issues. From this perspective, it integrates the practice of system construction and product innovation. Both the new third board and the growth enterprise market are already formed plates, but the transfer board is a new thing. The new third board system is also a reform combining system construction and operation application. From the reform content of these aspects, we hope that Shenzhen will carry out reform attempts in various aspects of the capital market, so as to establish a capital market system that truly serves small and medium-sized enterprises, innovation and entrepreneurship, especially the construction of innovation capacity, or a capital market that can play its role to support the better development of innovative enterprises.

Southern finance and Economics: what challenges will the reform and construction of Shenzhen's capital market face in the future? What else is there to imagine?

Zhao Xijun: due to the implementation of the registration system, the role of the market mechanism is becoming more and more important. The relevant market entities are required to fulfill and undertake their professional responsibilities, and the responsibility for information disclosure will also be increased. More and more new enterprises will enter the market, which will make the market more active. In addition, the intensity of opening up will continue to increase, and the fluctuation will also increase. All these aspects will face challenges. Now we can introduce some mature market practices. For example, we didn't have a short selling mechanism at the beginning, or even all kinds of risk prevention and control mechanisms when all stock prices fell. But later we developed stock index futures, which can actually avoid risks when the stock price falls, which can be understood as having a certain short function. But not for a single stock, but for the collective stock index to short, this has been. In addition to the above, we have paid more and more attention to the protection of the interests of investors from the above aspects. For example, most mature markets are funds, such as the pension fund of the state and the annuity of trade unions of large enterprises. Their strength is very strong, not weaker than that of listed companies. In addition, there are a lot of judicial resources to support the arrangement of legal system such as class action. From the experience and lessons of other countries, this is a direction.

The internationalization of China's capital market

Nanfang finance and Economics: please talk about the role of CDR, a pilot innovative enterprise in Shenzhen, on the internationalization of China's capital market? What impact will it bring to the A-share market?

Zhao Xijun: in fact, CDR has already tried to design interconnection between Shanghai and London exchanges. Therefore, in Shenzhen, it is not the first attempt, but when Shenzhen Stock Exchange carries out the reform of gem, it also considers the requirements of CDR reform, so it integrates the reform of gem with the innovation of CDR products. It can be said that this is a new attempt. It is earlier for us to raise funds from overseas investors. Later, QFII, rqfii, Shanghai Hong Kong stock connect, Shenzhen Hong Kong stock connect and so on were designed to introduce funds from overseas and two-way channels to go abroad, from one-way introduction of funds to two-way channels. Now, CDR actually enables overseas listed enterprises to enter the domestic market to raise funds through CDR, which further expands the depth and breadth of our capital market opening.

Nanfang finance and Economics: facing the return of China capital stock, what factors need to be overcome in the domestic market?

Zhao Xijun: the return of zhonggai shares is actually due to various factors. In principle, it is a matter of market choice for an enterprise to choose where to list. Of course, there are various considerations. From the perspective of supporting capital to serve the real economy, you need to provide various services for all kinds of listed companies, which is a direction. However, if you want to provide financing services, you need to have a variety of arrangements. CDR is actually to provide financing for enterprises listed abroad to enter the domestic market and provide a convenient and channel for listing and trading. In this sense, CDR can become a carrier for the return of China capital stock, and it also provides a channel for overseas listed enterprises other than China capital stock to enter the domestic market and Shenzhen for financing. Now, Shenzhen's gem and Shanghai's science and technology innovation board have introduced registration system in the issue system, and the trading, information disclosure, delisting and other systems are designed and arranged around the requirements of the registration system. Therefore, there is no big difference between the institutional arrangements of other places, and they have been more market-oriented. In this sense, if enterprises listed outside the gem and the science and technology innovation board or overseas want to enter the science and technology innovation board or the gem, the institutional barriers to listing and trading should be small. But now the listing and trading between our two markets is not only a matter of opening up the capital market, but also involves the issue of foreign exchange management. If it does not involve foreign exchange management and mutual circulation of funds, there will be no problem where listed companies will be listed. However, when it comes to foreign exchange management, we need to consider the corresponding adjustments and changes in foreign exchange management to meet this requirement.

There is still room for institutional design and arrangement

Nanfang finance and Economics: while promoting the openness of CDR, it also involves cross-border regulation, differences in corporate law and investor protection. What are your suggestions?

Zhao Xijun: when Shanghai designed the Shanghai Luntong, we already had the corresponding consideration and scheme. We can use it as a reference when designing in Shenzhen. Of course, because CDR involves overseas listed companies, it issues this alternative variety in China for trading, which involves the issue of securities conversion, and then the related information conversion of investment listed companies and the investment of domestic investors are quite different. These aspects should be designed and arranged comprehensively. Now we are increasingly emphasizing the protection of investors' interests. Relevant departments also have an arrangement mechanism. In particular, the newly revised Securities Law, which came into effect this year, has special requirements and provisions for the protection of investors' interests. At the same time, in terms of mechanism design, we also put forward some mechanism designs that are closer to the mature market, such as litigation system, etc., not only supervision, but also other judicial means to protect the interests of investors from all aspects.

Nanfang finance and Economics: if the transfer mechanism of companies listed on the new third board can be smoothly promoted in Shenzhen, what impact will be brought to small and medium-sized enterprises, capital markets and financial intermediaries?

Zhao Xijun: in fact, the issue of board transfer has been discussed for many years. This time, as a part of the comprehensive reform plan of Shenzhen, the reform and pilot of the transfer between the new third board and the growth enterprise market has been raised. The key is that the listing requirements and standards of the new third board are quite different from those of the gem. After all, gem is such a mechanism of centralized trading. The new third board is more about display pricing, it is not a financing transaction. Due to different listing mechanisms, the threshold is different. At the same time, the transaction after listing, information disclosure, and the corresponding governance requirements, the responsibilities of listed companies and intermediary organizations are different. If you want to transfer to the gem, you should meet the more stringent requirements of the gem and improve it. In order to do this work, the new third board is now divided into three different levels, the highest of which is the selection layer. Through this kind of stratification, the better enterprises in the new third board can cultivate them and make them meet the requirements of gem, so as to meet the unified regulatory requirements. Therefore, the transfer board is actually through the stratification of the new third board and related management reform, so that some excellent enterprises can meet the listing requirements of gem as early as possible, and simplify some steps. For example, if they want to cultivate new accounting firms on the third board, it is also necessary for them to cultivate new accounting firms. Of course, the more important thing is that the listed companies should have the ability to meet the listing requirements of the gem, which I think is very important. In addition, there must be a new business to be carried out. This operation organization may also involve securities dealers, accountants, lawyers and so on, including how to link up the Shenzhen Stock Exchange.