Establish an information exchange mechanism to strictly prevent financial fraud by listed companies
Cai Jianchun, member of the National Committee of the Chinese People’s Political Consultative Conference and President of the Shanghai Stock Exchange, told the reporter of Shanghai Securities News that “Effectively identifying and cracking down on financial fraud is not only an inevitable requirement for promoting the high-quality development of China’s capital market, anti-fraud, and promoting development of China’s securities market in the new era, but also a necessary condition for promoting the full implementation of the stock issuance registration system and improving the quality of listed companies.”
Facing the increasingly complicated problem of financial fraud in the capital market, Cai Jianchun proposed two specific suggestions: establishing a big data platform to combat financial fraud in the capital market, and establishing a regular communication and consultation mechanism across departments to combat financial fraud in the capital market.
Specifically, the first is to use technological means such as big data, the Internet, and artificial intelligence to realize information sharing among authorities in public finance, taxation, customs, financial regulation, market supervision, industry supervision, local governments, and judiciary authorities, and to share regulatory data across banks, customs, electricity, social security, and taxation, which will be specifically used to crack down on illegal activities such as financial fraud in the capital market. After discovering suspicious areas, the securities regulatory authorities will submit a list of suspicious entities to the big data platform, cross-reference the financial information with various information on the big data platform, check and verify whether there are financial frauds and other illegal activities, and systematically improve the ability to identify financial fraud.
Second, the securities regulatory authority can hold regular meetings with the National Development and Reform Commission, China Banking and Insurance Regulatory Commission, the State Administration of Taxation, the General Administration of Customs and other departments to report on the work related to combating financial fraud in the capital market, study the difficulties and problems in information sharing, form solutions and coordinate efforts.
Encourage central SOEs to make full use of capital market tools
In the second proposal, Cai Jianchun focused on the development of listed central SOEs.
At present, the total assets of listed companies controlled by central SOEs account for nearly 60% on the A-share market, operating income accounts for more than 50%, and net profit accounts for nearly 60%, which constitutes an important ballast and stabilizer of the A-share market, and also reflect their status as an important pillar of the national economy. However, the market performance of such listed companies is not satisfactory, and the valuation level of central SOEs is generally low. Compared with five years ago, the profits of listed SOEs have increased by 70%, but their market capitalization has only increased by 10%. The price-to-book ratio of these listed companies is 0.86 times, a drop of 30%, which is significantly lower than the market average of 1.6 times.
“These problems not only restrict the ability and space of central SOEs to use the capital market, but also are not conducive to the construction and high-quality development of the capital market. It is necessary to actively take various measures under the joint efforts of relevant ministries and commissions to guide all parties in the market to build consensus, form synergy, and overcome difficulties.” Cai Jianchun said.
In order to solve the problems above, he suggested focusing on four aspects: First, the leading role of central SOEs in the field of science and technology innovation should be further strengthened, and central SOEs can better utilize the capital market and the STAR Market to promote the national strategy of innovation-driven development. Second, central SOEs should be encouraged to fully utilize instruments in the capital market, especially new products in the capital market such as public REITs and technology innovation bonds, to tap the full potential of existing resources and enhance the core competitiveness of central SOEs. Third, the valuation of central SOEs should be facilitated to return to a reasonable level, so as to promote the quality improvement and value discovery and enhancement of those listed central SOEs. Fourth, use instruments of the capital market to promote the strategic restructuring and integration of central SOEs in a way of specialization and industrialization, and give full play to listed central SOEs as leaders in the industrial chain, so as to optimize industrial landscape and improve industrial environment.
Promote the Inclusion of Index Funds in the Allocation Scope of Individual Pension
In the third proposal, Cai Jianchun brought his suggestions on promoting index funds to be included in the allocation scope of individual pension.
Cai Jianchun pointed out that the development of individual pension in China mainly faces two major difficulties at present: First, the overall size of China’s individual pensions is small, and the willingness to contribute needs to be improved. Second, equity accounts for a small proportion in the investment allocation of China’s individual pension, and investment returns need to be improved.
Based on comprehensive consideration of the characteristics of China’s pension system and the securities market, Cai Jianchun suggested that relevant departments include index funds into and expand the investment scope of individual pension.