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Downturn won't prevent capital market innovation

CHINA plans to continue to innovate its capital market despite the global financial crisis as well as increase supervision and clamp down on financial crimes, the top securities regulator said yesterday.

"People tend to be conservative about financial products after the crisis but we feel the market still needs innovation," said Shang Fulin, chairman of the China Securities Regulatory Commission, at the Lujiazui Forum 2009.

"Only by conducting innovation can we improve market efficiency. We will definitely launch more futures products as well as study plans to unveil cross-border financial products," he said.

Preparations have been going on to launch the country's first stock-index futures products in Shanghai and there have also been moves to push forward other financial derivatives such as index options and single-stock options.

The central government has also allowed Shanghai to consider the introduction of exchange-traded funds to track indexes constituted by Hong Kong-listed stocks as part of measures to develop the city into a global financial hub.

Shang said the CSRC will boost supervision to deal with the impact of the global financial crisis and focus on overseeing cross-border capital flows. It will also set up contingency plans to counter emergencies.

The CSRC will also rev up efforts to clamp down on market manipulation, insider trading and illegal profit transfers between market participants in order to maintain order, Shang said.

He said rule drafting and education of investors will be revved up as plans continue to launch the Nadsdaq-like Growth Enterprise Board. The GEB is expected to be launched in Shenzhen as early as August to help small start-up companies raise capital.

"We will help smaller companies solve fund-raising problems and we will also help existing listed companies conduct mergers and acquisitions to upgrade industry structure," Shang told the forum.

The CSRC will encourage publicly traded companies to distribute more dividends to shareholders and continue to develop a bond market, Shang said. The regulator is also studying how to reform the pricing system for initial public offerings, Shang said, without elaborating.

Amid worries that a rise in stock supply would further dent investor confidence after the equity market fell sharply last year, IPOs were halted in September.

The central government has not said when IPOs will resume but experts think they will start again on the new GEB in the third quarter of this year.


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