China's capital market has long-term investment value, and the timing is right to reform the domestic capital market piece by piece, according to a key financial meeting held on Thursday.
China's Financial Stability and Development Committee (FSDC), a financial regulatory body under the State Council, China's cabinet, held a meeting with representatives from financial institutions including commercial banks, securities firms and insurance companies on Thursday, according to a statement on the website of the People's Bank of China, where the committee is based.
Financial departments are urged to accelerate their pace in implementing reform in establishing a law- and market-based capital market, said the statement.
Compared with mature capital markets in developed states, China's capital market started late and still lags behind in terms of market orientation and law-based rules, said Chen Li, managing director at Beijing-based Chuancai Securities Research Institute.
Dong Dengxin, director of the Financial Securities Institute at Wuhan University of Science and Technology, told the Global Times on Thursday that China's stock market lacks long-term investment from institutional investors. Additionally, listed firms bear only small costs when breaking rules or laws.
"The key meeting just releases a clear signal to conduct reforms in the capital market sector with a down-to-earth attitude, and this also means good opportunities for the equity market development," Dong said.
China will implement a slew of specific measures to seize the opportunity by strengthening management of listed firms and reducing administrative intervention in transactions in capital markets, while also opening channels for asset management products entering the market, said the statement.
"The Chinese economy's micro fundamentals have somehow dipped and completed a soft landing. The most difficult period is nothing more than this," said Dong, adding risks have been basically erased thanks to overcapacity cuts, deleveraging, and destocking over the past three years.
"The A-share market has stepped into a value investment era," Dong said.
The Shanghai Stock Exchange is set to launch a new science and technology innovation board, and the new trading platform will experiment with a registration-based system for listed companies.
"The board and registration system have brought opportunities for enhancing efficiency and expanding scale in the domestic capital market, and it is the main direction for future reforms," said Chen.
Capital moves like mergers and acquisitions abound in China's industrial structure adjustment process and, as such, the capital market can better serve the real economy, he noted.
The A-share market can also attract more overseas capital as it has become more open and tolerant, Chen added.