Policy support vital to boost innovation
By Sun Min (China Daily)
Updated: 2004-08-25 08:54

China's securities houses should step up innovation to get a solid footing in market competition and the authorities will give them more policy support, a top securities regulator said yesterday.

A few qualified pilot firms will be chosen to promote the innovative products and reforms and they will enjoy simplified application procedures.

And when the experiment matures, it will be enlarged to include the whole securities industry, Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC), said at a conference on innovation in the securities industry yesterday in Beijing.

He also confirmed that the authorities would offer more support to innovative efforts.

Innovation is a major impetus to the securities business, which is facing some difficulties and demands further reform measures, Shang said.

China's more than 130 securities houses are hindered by limited financing and product diversification. Meanwhile, poor risk control and management also brewed a slew of fund embezzlement scandals and investment failures in the bearish stock market which further eroded their profitability.

The sector is urged to seek new profit resources and market orientation to improve performance and withstand the mounting competition from foreign counterparts as China further opens up the financial market.

Building a vigorous and high-quality force of securities companies is also crucial to the steady and healthy development of the overall capital market, said Shang.

Already, the securities and futures markets of China have witnessed the birth of more new futures and fund products this year.

Securities companies are also beginning to make some breakthroughs, with three issuing corporate bonds this year to increase financial strength with more following their lead later this year.

"We have just started our bond issuance," said an official with Shanghai-based Everbright Securities yesterday.

"We will also kick off shareholding restructuring reform soon to introduce more strategic investors and prepare for a public listing," he said.

A number of other securities firms have also handed in their proposals for new product launches and systematic reforms, which cover a wide range of businesses, from asset management, investment banking, bond repurchase to financial derivative products.

But meanwhile, risk control is an indispensable part of the reform to make all the measures pay off.

China is still an emerging market. And there are plenty of opportunities and risks, said Shang Fulin.

Only those who combine regular operation and risk control with innovation and expansion will grasp the opportunities, he said.

The practice of offering more incentives to the few well-performing firms is a first step adopted by the securities regulators to promote innovation.

It is hoped that the pilots will make a good start, so that more firms can join in later on, analysts said.