A 20,000-word document released by the state of China on Friday revealed that it has plans to refine its multilevel capital market system and will be pushing for changes on its registration-based stock issuance system, referring to its initial public offering system. The document was said to be the country's plans to implement reforms on economic policies in the next ten years. Although the statement did not disclose further details about its plans on how to implement such reforms, the Wall Street Journal noted that this was the strongest statement China's top leaders had made. It also indicated that China was more open now to adopt a modern, market-centered mechanism on what was deemed to be one of the popular routes to raise corporate fundraising, said The Journal in its report.
Hong Kong-based research firm Reorient Financial Markets research director Steve Wang said, "It's definitely a positive development as China is moving in line with international norms in this regard, which is certainly the right path to take."
However, skeptics said that the process for China to roll out its IPO system with the new amendments might take longer than expected, and may require legal and regulatory improvements. China Southern Asset Management Co fund manager Yang Delong said. Although the new system would benefit securities firms in China, the Chinese markets are still being dominated by individuals.
Capital Securities senior analyst Amy Lin said, "It takes a long time to establish a viable registration-based system as it requires a high degree of professionalism and ethics among accountants, lawyers and brokers, as well as a group of sophisticated investors."
China's slow listing process had repelled some of the most ambitious and innovative private firms to list elsewhere. Analysts said technology companies like Alibaba and Baidu had already sought to list in Hong Kong and New York. Moreover, the current IPO system has also been plagued by financial fraud and widespread irregularities, said Yang.
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