Here we present the main points of The New Nine State Rules issued on May 8 2014 with more details on the most promising developments in China's capital markets regulation (highlighted in italics).
State Council’s several opinions on further promoting healthy development of the capital market (commonly known as New Nine State Rules)
1. The General Rules
1) Guiding Ideology
2) Basic Principles
3) The Main Task
By the end of 2020, China should be finalizing the work for establishing a multi-level capital market system with a solid structure, full functionality, and standardized and transparent rules. In addition, the system will be robust, efficient and inclusive.
2. The development of Multi-level Stock Market
4) Actively and Steadily advance the stock issue and registration reform
Issuers and intermediaries will be liable for the authenticity, accuracy, integrity, adequacy, timeliness of the information disclosure.
5) Accelerate the construction of multi-level equity market
Accelerate the improvement of share transferring system for SMEs in China and establish small-amount, convenient, flexible, diverse investment and financing mechanisms. Along with the clearance, the government should try to integrate the regional equity markets into multi-level capital market system. Perfect the centralized registration and settlement system is needed.
6) Improve the quality of listed companies
Enhance the effectiveness of information disclosure
Improve the equity incentive system for listed companies, allow the listed companies to launch employee stock ownership plan through various forms in accordance with the regulations.
7) Encourage the mergers and acquisitions led by market principles
8) Perfect the delisting systems
3. Regulate the development of the bond Market
9) Actively develop the bond market
10) Strengthen the bond market credit constraints
11) Deepen the bond market interoperability
12) Enhance regulatory coordination for the bond market
4. Foster the private equity market
13) Establish a sound system for the private equity issuing system
14) Develop the private investment funds
5. Promote the construction of the futures market
15) Develop the commodity futures markets
Continue to promote the commodities futures, develop commodity options, commodity index, carbon emissions and other trading tools. In purpose of hedging, governments will allow qualified institutional investors to use futures derivative instruments.
16) Construct the financial futures markets
In accordance with the goals of interest rate liberalization and RMB exchange rate reform, promote risk management in the capital markets, develop the financial derivatives, develop the bond futures, further improve the treasury yield curve to reflect the market supply and demand more accurately.
6. Improve the competency for the securities and futures services
17) Relax the restrictions for business access
Encourage the private capital to enter the securities and futures services market.
18) Promote the innovation development for the agency
Facilitate the formation of several modern investment banks with international competitiveness, brand influence, and systemic importance.
19) Strengthen the professional institutional investors participation
Support the National Social Security Fund to actively participate in the capital market investment, support Social Insurance Fund, corporate annuity, pension funds, commercial insurance funds, long-term funds and foreign institutional investors to expand the scope and scale of investment in the capital market gradually. Promote commercial banks, insurance companies etc. to set up fund management companies, develop the securities investment funds vigorously.
20) Guide the development of the securities and futures Internet business
Support the qualified Internet enterprises to participate in the capital markets, promote the healthy development of Internet finance, and expand the coverage of capital markets services.
7. Expand the capital market liberalization
21) Facilitate cross-border investment and financing
Steadily open the domestic capital markets in order to allow foreign individuals to directly invest, gradually promote the domestic individuals to invest in overseas capital markets.
Relax the restrictions for foreign ownerships in the listed companies gradually
22) Increase the allowance for the foreign investors participation in securities and futures industry.
Encourage domestic securities and futures business institutions to implement the “going out” strategy, enhance the international competitiveness, promote the connections between domestic and international security exchange market, and promote the mutual recognition products for domestic and foreign funds. Explore the reform for the B-Share market.
23) Strengthen the cross-border supervisory cooperation
8. Guard and defuse the financial risks
24) Improve mechanism for systemic risk monitoring and early warning
25) Improve market stability mechanism
26) Punish the securities and futures law violations severely
27) Promote the transformation of the securities and futures regulators.
9. Create a favorable environment for the development of capital markets
28) Perfect the law and regulation system
29) Commit to protect the investors’ legitimate rights and interests, especially for small investors
30) Perfect the tax policy for capital market
31) Improve market infrastructure
32) Strengthen coordination and cooperation
33) Regulate the capital market information broadcast.