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Shi Donghui, Professor Of Finance, School Of Oceanwide International Finance, Fudan University

2020/11/4 18:56:00 149

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In 2020, China's capital market will usher in a glorious moment of 30 years of development. Looking back on the 30-year development track and reviewing the development process of China's multi-level capital market from scratch, from immature to mature, it can be called a grand masterpiece.

Standing on the node of 30 years and summing up the experience and lessons of the past development, we can make the capital market go better. At the same time, exploring the development strategy under the new historical opportunity will point out the direction for the future.

Experience, lesson and prospect are three macro problems that are not easy to answer but have to think about. Recently, Prof. Shi Fuhai, director of the Institute of finance of the 21st century university, made a special report on the above topic.

Shi Donghui has 23 years of experience in the securities market. He entered the Shanghai Stock Exchange in April 1997. He has successively served as a researcher of the research center, director of the fund market department and director of the Institute of capital market research. He is now a professor of finance at the school of Oceanwide International Finance of Fudan University.

He has participated in the scheme design and practice of many major market reform initiatives, with regulatory experience and scholar's research vision.

Experience and lessons of 30 years' development

In 2020, China's capital market will usher in a glorious moment of 30 years of development. Visual China

21st century: looking back on the 30 years of China's capital market, what do you think are the important experiences?

Shi Donghui First, we should serve the development of the national economy and realize the coordinated development of the capital market and China's economy. Since its birth, China's capital market has been closely serving the urgent practical problems and future development needs of China's economy. From 2006 to 2008, the capital market provided an effective platform for the joint-stock reform and listing of state-owned large and medium-sized enterprises and state-owned commercial banks. The launch of the gem in 2009 and the establishment of the science and Technology Innovation Board last year have optimized the ecosystem of China's innovation and entrepreneurship investment and financing system. In the past 30 years, the capital market has raised about 13 trillion yuan by issuing shares. These funds have been injected into enterprises of all walks of life, providing a very important driving force for China's economic development. At the same time, with the help of China's rapid economic growth, China's capital market has made a historic breakthrough and leapfrog development in the past 30 years.

Second, we should adjust the complicated interest relations by gradual reform and break through the resistance of capital market development. China's economic reform is carried out in a gradual mode, that is, on the premise of not breaking the traditional system for the time being, we should first establish a new system economy and gradually expand its scale, and then use the latter to promote the reform of the former. The development of capital market is the typical embodiment of this reform strategy. At the beginning of its establishment, in order not to shake the dominant position of public ownership, state-owned shares, corporate shares and public circulation shares were introduced into the equity structure arrangement. In the process of the reform of non tradable shares, through careful exploration of pilot projects, and on the basis of summing up experience, it has realized the coordination of unified government organization and decentralized decision-making of market entities. In the process of promoting the reform of the stock issuance registration system, which is a major basic system of the capital market, we also choose a gradual reform path, and design a series of system systems from the issuance, listing, trading, supervision, including delisting, etc. we first try in the science and Technology Innovation Board and the growth enterprise market, hoping to summarize the experience and then transplant to other stock markets.

Third, we have made great use of modern information technology to provide programs and practices with Chinese characteristics in market operation, market service and market supervision. China's capital market is not bound by traditional institutional culture and historical burden. Since its establishment, China's capital market has made great efforts to use the latest achievements of modern information technology and communication technology to establish a fully electronic trading and settlement system; at the end of 2004, Shanghai and Shenzhen stock exchanges took the lead in launching the online voting system for shareholders' meetings in the world; in recent years, regulators and Shanghai Shenzhen stock exchanges have continuously increased first-line supervision According to the national conditions, China's capital market supervision mode has been created, such as "see through" supervision and so on. The international market has much to learn from.

21st century: besides experience, what lessons should be learned in the past 30 years?

Shi Donghui First, on the whole, different from the "effective market + promising government" of China's economy, the development of China's capital market is more embodied in "ineffective market + active government", and the administrative driving characteristics of market development are obvious. It is generally believed by theorists that a good handling of the relationship between the government and the market, that is, the so-called "effective market + promising government", is an important factor in China's economic success. In contrast with this experience, many problems in the development of China's capital market are precisely caused by the ineffective market and the "more and more promising" government.

From the perspective of market demand side, the structure of investors in China's stock market is still dominated by individual investors, accounting for more than 80% of the total trading volume in the secondary market. The final result of the market of individual investors is to force the institutions to become retail thinking. The speculation of the whole market is relatively strong, and "four speculation" prevails, which leads to low pricing efficiency and even failure. From the supply side of the market, the high valuation and high turnover of the secondary market provide a strong motivation and implementation possibility for the major shareholders of listed companies to "empty" the market. The immature demand side, the supply side incentive and restraint mechanism is unbalanced, in this case, as the largest institutional supplier, regulatory agencies are often excessive "promising" under the multi-objective policy choice, and the market development and reform often fall into a "dead circle".

The second lesson is that the market-oriented reform of stock issuance lags far behind the needs of economic transformation and development, leading to the deepening of market functions and the synchronous development of market scale expansion. The original conditions for issuing and listing in China's capital market are set for traditional industries and mature industries. The securities law before the amendment requires that the enterprises to be listed must be profitable and have good financial prospects, which seriously limits the market's inclusiveness to new economy enterprises, and makes the domestic capital market completely brush away from the Internet and mobile Internet era. The role of the stock market in promoting and leading the new technological revolution, new business model and new economic growth point, as well as forging great enterprises, is largely missing.

The third lesson is that the capacity building of market participants is seriously insufficient, which weakens the effectiveness of the reform of market system rules and delays the process of market-oriented reform. The reform of China's capital market over the past years has mainly focused on the level of institutional rules. By referring to international best practices and combining with the actual situation of China's market, the reform aims to build a standardized and efficient market system. However, due to the defects in the system and mechanism, the capacity building of market participants is seriously insufficient, and the promotion of market-oriented reform is constrained by the immature market participants. For example, in the case of low threshold of practice and serious homogenization competition, the "gatekeeper" mechanism of intermediary agencies in enterprise screening, due diligence, IPO pricing and other aspects has not yet played a good role. Therefore, the reform of capital market must be carried out simultaneously in three interrelated aspects: the main body of participation, the system rules and the macro management.

Highlight of registration system reform: paying attention to the systematicness of reform

21st century: the registration system is a major reform in the capital market in recent years. How do you evaluate the progress of the registration system?

Shi Donghui The establishment of the science and technology innovation board and the pilot registration system reform is progressing smoothly and running well. At the same time, a series of key reform measures are gradually implemented and orderly promoted. I think there are three main reasons for the smooth implementation of this round of reform

First, after several rounds of exploration and practice of market-oriented reform, all participants in the market have realized that the biggest market-oriented reform of capital market must be the marketization of supply, that is, the reform of issuance registration system. It is necessary to set up the central registration board and give it to the central government to make sure that it is the core of the reform. Therefore, the reform idea and basic orientation of registration system are further refined as "taking information disclosure as the core". After a period of reform and practice, people's understanding of this concept has been deepened and the consensus has been strengthened.

Second, we should attach importance to the systematicness of the reform and realize the overall matching of the reform measures of the registration system through market-oriented reform and legal perfection. This reform has learned from the experience and lessons of several previous issuance system reforms, and made it clear that the reform of registration system should be taken as the lead to promote the reform of basic systems such as issuance, listing, information disclosure, trading and delisting. In terms of specific measures, on the one hand, it adheres to the market-oriented orientation and plays a role in constraining the capital and reputation of investment banks by establishing market mechanisms such as "sponsor and investment". The price, scale and rhythm of new stock issuance are mainly determined by marketization; on the other hand, it adheres to the improvement of legalization, which promotes the revision of the securities law at the legislative level, and promulgates specialized and comprehensive justice at the judicial level These measures will comprehensively increase the illegal cost and ensure the smooth progress of the registration system reform led by the market mechanism.

Third, for a long time, China's capital market has formed an impossible Triangle Phenomenon of "promoting system reform, giving full play to the financing function and maintaining market stability", and the reform has fallen into a series of cycles to some extent. At the same time of promoting the registration system reform, the internationalization process of the market is also accelerating. The restrictions on the ratio of foreign shares of securities, funds and futures companies are gradually liberalized; the interconnection mechanism is constantly improved, and the speed of foreign investment in A-share market is further accelerated; the proportion of a shares incorporated into Mingsheng, S & P Dow Jones, FTSE Russell and other international well-known indexes is gradually increased. Since the beginning of this year, overseas investors have continued to buy domestic stocks through channels such as Shanghai Shenzhen Hong Kong stock connect, QFII and rqfii. China's capital market has been deeply integrated into the global financial market system, pushing the market out of the strange circle of "fear of expansion" and Impossible Triangle.

Deixis index

21st century: under the current situation, what problems need to be solved in the further development of China's capital market?

Shi Donghui From the past reform process, it is not an easy thing for China's capital market to adhere to its own direction and maintain the determination of reform in the noisy and complicated public opinion environment, which requires further unified understanding and consensus on some basic concepts of market development.

First, the purpose of the registration system is to "ask for a real company". There are usually two kinds of risks in stock issuance audit: one is to bring the poor enterprises into the market; the other is to "shut out" the good enterprises. Registration system and approval system have different emphasis on these two kinds of risks. The idea of the registration system is that "it's better to let go of a thousand, it's better to kill one". It's better to risk putting some poor quality enterprises into the market, but also can't miss the great enterprises in the future. Therefore, in the process of audit, the attention to the quality of listed companies is diluted, and the hope is to "ask the real companies" by taking information disclosure as the core.

Second, the promotion of reform policy needs to get rid of index worship. At present, in the face of the ever-changing prices in the stock market, complicated information and a strong desire to pursue sudden wealth, the whole society has a fickle mentality. The so-called "one Yang (Yin) line changes emotions, two Yang (Yin) lines change ideas, and three yang (Yin) lines change beliefs", which makes fun of this phenomenon. In the face of the short-term ups and downs of the market, the society and the media should "not fear the clouds to cover the eyes, and the scenery should be long-term, and should not evaluate and affect the process of system construction by the simple market rise and fall. Today, when we begin to abandon the idea of GDP first and start to pursue more healthy economic development, the "index fetishism" of the stock market can be put to rest. The regulatory authorities should resist the pressure, maintain their determination, adhere to the market-oriented reform unswervingly, especially avoid the fundamental system related to market development from "left and right" in the direction, so that the market can form a stable policy expectation.

Third, the securities regulatory agencies do not protect the investment income of small and medium-sized investors. Stock investment is a complex economic activity involving tens of millions of people, sharing individual opportunities and even high growth opportunities of a few companies. Even in the mature U.S. stock market, the bull market in the past few years has been mainly driven by seven technology stocks, including Facebook, Amazon, Netflix, Google, Microsoft, apple and NVIDIA (known as fangman in the media). Investors should have a clear understanding of participating in stock market investment, and can't unrealistically expect to make profits by investing in stocks. The final result of the market operation is that some people make profits, some people lose money, some stocks rise and some stocks fall. This kind of differentiation reflects the pricing efficiency of the market, while the general rise and fall are the immature performance of the market.

In this we media era, everyone is the media, and supervision has become a group game with this noisy era, which has brought new pressure and challenges to the supervision. Therefore, it is necessary to further clarify the responsibility boundary of supervision. Investors' long-term returns are affected by many factors, such as their ability to obtain and process information, risk preference, behavior deviation, investment period and so on. Regulatory authorities should also get rid of "paternalism" and focus on providing effective legal tools and relief means for small and medium-sized investors to ensure that they are not cheated and plundered because of their weak position.

Enhance financing function: build investment banking system and improve pricing efficiency

In the past 30 years, capital market has played an important role in promoting the development of China's economy. But focusing on the current situation, corporate financing is still facing a lot of difficulties, how do you think to solve this problem?

Shi Donghui The development of direct financing in the process of China's financial system transition is indeed worth studying. As China's economy moves towards a new stage of transformation and upgrading and innovation driven development, the demand for financing is becoming more and more important.

At present, the proportion of direct financing in the total amount of new social financing is about 20%, while that of stock financing is only 3%. Obviously, the proportion of equity in the financing market should be increased. From the international perspective, the situation in the euro area is similar to that in China. 80% of corporate capital comes from bank loans, 20% from bond financing. The US capital market system is the most developed. 67% of corporate capital comes from bond financing, and the remaining 33% comes from various types of loans. It can be seen that in the two major economies in Europe and the United States, the amount of net equity financing can be ignored. In fact, the situation in the United States in the past 45 years is the same. Then, in the process of China's financial system transition, how to determine the relative proportion of direct financing and indirect financing? What is the appropriate proportion of equity financing in direct financing? In addition, there are at least two issues worth exploring.

One is how to build an investment banking system with international competitiveness. Judging from the domestic situation, the total assets of all financial institutions in China are 333 trillion yuan. Among them, banking institutions account for 90.7%, securities institutions account for 2.7%, and the remaining 6.6% belong to insurance institutions. From the perspective of international comparison, the total assets of 131 securities companies in China are equivalent to those of Goldman Sachs in the United States, and there is a significant problem of "large market and small industry". How to build an investment banking system with international competitiveness? In terms of reform ideas, can we learn from the successful experience of the reform of state-owned commercial banks? Specifically, can we explore the possibility of injecting capital into specific securities companies through special treasury bonds or central bank refinancing. After obtaining capital injection, securities companies can participate in the subscription of securities underwritten by them with their own capital. It can be expected that the implementation of the above plan will make the function and scale of the capital market jump to a new level. It can not only promote the financing and listing of enterprises through financing convenience and innovation of capital accumulation, but also can strengthen the team of domestic securities dealers, so as to realize the goal of stable growth and structural adjustment of China's economy with the capital market as the hub.

The second is how to improve the pricing efficiency of the market. The capital market is an important place to allocate social capital. In order to realize this basic function successfully, the stock price must reliably reflect the company's intrinsic investment value, that is, the market pricing is efficient on the whole. Reasonable pricing efficiency depends not only on the timely, comprehensive and accurate disclosure of information, but also on the marketization of stock issuance and mature and rational investors. However, it is difficult for small and medium-sized investors to improve their investment efficiency in a short period of time? In addition, under the registration system, how to attract long-term capital into the market, maintain the sufficient supply of both supply and demand, truly realize the marketization of stock issuance and delisting, and reconstruct the market pricing system? These are major issues that need to be further explored.

21st century: from the perspective of multi-level capital market construction, what problems should we pay attention to?

Shi Donghui From the perspective of overseas multi-level market development, the design of listing conditions highlights the differences of different levels, and the listing entities of different levels are also significantly different in the actual operation of the system. The purpose is to enable enterprises in different development stages to choose their own financing methods and shareholder structure, and at the same time, allow the majority of investors to choose the appropriate investment market according to their own risk preference. Compared with the multi-level market with a clear hierarchy of mature markets, the multi-level capital market of China's exchanges is "in shape but not in mind". The most direct reason behind the above problems lies in the lack of a clear market positioning of each market segment, there is no obvious difference in the listing system of different market segments, and the setting of listing conditions is relatively simple, "there is a lower limit but no upper limit".

In the current environment of both the science and technology innovation board and the growth enterprise market, how to avoid "homogenization" competition between the two market sectors again under the threat of local interests, which will lead to regulatory competition and disordered competition between exchanges? How to establish a multi-level capital market system with distinct levels, complementary functions, dislocation development and organic connectivity to support the common development of enterprises in different formats, scales and stages? Objectively speaking, there is still much room for improvement in the coverage of enterprises and the efficiency of market-oriented allocation of capital elements. This is also the problem to be solved in the construction of multi-level capital market.

New challenges under the gradual reform

21st century: apart from financing, what challenges do you think China's capital market will face in the next 10 years?

Shi Donghui First, the path choice of capital market reform. Gradual reform is the main path of capital market reform, and its essence is "crossing the river by feeling the stones", which is a progressive method to optimize policies through experiments. This method has a good effect on the level of basic market system rules, because it usually takes several months or even several quarters for participants such as listed companies to respond to policy changes, which gives policy makers enough time to study the response and make appropriate policy adjustments.

But at the transaction level, because the stock market provides more flexibility for participants to obtain financing and trading, investors can quickly respond to the reform of trading mechanism, and serious speculation may make the gradual reform path invalid. More importantly, investors' trading behavior is affected by many factors. Therefore, in the environment of existing investor structure and high speculative atmosphere in the market, is the reform of "t + 0" trading mechanism suitable for gradual reform path? How to copy from the innovation of incremental market to the reform of stock market? This aspect needs further research and exploration.

The second issue worthy of study is to strengthen supervision and strictly enforce the law in the environment of the promotion of registration system and the great development of capital market. At present, the newly revised Securities Law and the criminal law amendment have greatly increased the punishment of securities crimes. In the ecological environment of intertwined local interests and imperfect market short mechanism, it is necessary to study how to strengthen supervision, strictly enforce the law, and more accurately crack down on the key minority who should be responsible. While strengthening the supervision, we should also study the issue of deregulation, relax the administrative examination and approval control timely, give the market self-discipline supervision appropriate growth space, and improve the responsibility system of "late mover", which is the necessary prerequisite for strengthening the supervision and further development of the stock market.

The third issue worthy of attention is how to prevent the stock price bubble and the financial risks it brings. China is now entering a turning point where the allocation of residents' assets is more inclined to financial assets, especially equity assets, which provides a "perfect" environment for the formation of bubbles. How to guard against leverage trading and stock price bubble and the financial risk it brings? Can we reduce the pressure of bubble formation by selling state-owned shares? How to cultivate and form a mild creative bubble so that the capital market can take on the historical mission of leading scientific and technological innovation and cultivating new economic growth function? These problems are worthy of in-depth study and serious response.

 

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