Wu Qing explains the five major directions for the high-quality development of the capital market during the "15th Five-Year Plan," with public fund and securities firm chiefs providing frontline insights!

By Daily Economic News reporter | Li Lei |
By Daily Economic News editor | Zhao Yun

On March 6, the 4th session of the 14th National People’s Congress held an economic-themed press conference. China Securities Regulatory Commission Chairman Wu Qing systematically discussed the achievements of China’s capital market during the “14th Five-Year Plan” period, and clearly set out the core direction for the capital market to move toward high-quality development during the “15th Five-Year Plan” period. He proposed efforts to drive an effective improvement in quality and a reasonable growth in quantity, and to strive for new progress in five areas.

The reporter of the “Daily Economic News” noted that, regarding the policy signals released by this speech, multiple key participants in the capital market—including fund companies—also provided interpretations from an industry perspective, highlighting the capital market’s core hub role in serving Chinese-style modernization and the building of a financial power.

“14th Five-Year Plan” capital market: leap in quantity and quality
The stock market’s “barometer” role becomes even more prominent

At the press conference, Wu Qing said that during the “14th Five-Year Plan” period, under the strong leadership of the Party Central Committee and the State Council, the CSRC, together with relevant parties, deeply implemented the new “Nine Articles” and actively responded to multiple challenges at home and abroad. It advanced capital-market risk prevention, strengthened regulation, and promoted high-quality development in an integrated manner.

A series of key data attest to the effectiveness of capital market development: during the “14th Five-Year Plan” period, financing in the exchange market for stocks and bonds reached 64 trillion yuan. The share of direct financing increased to 31.97%, up by 3.2 percentage points compared with the end of the “13th Five-Year Plan,” and the social financing structure is undergoing profound changes.

Of the 64 trillion yuan in financing, 5.9 trillion yuan is stock financing, covering IPOs and refinancing. In the same period, cash dividends paid by the stock market reached 10.7 trillion yuan, which indirectly reflects the continued development of the capital market’s investment function. As of now, the total market value of A shares exceeds 110 trillion yuan. More than 5,400 listed companies have annual revenue amounts exceeding half of GDP. In the CSI 300 constituent stocks, the weight of enterprises in strategic emerging industries accounts for 45%, and the momentum for the capital market to develop toward “new and better” continues to accumulate. In terms of the capital structure, long-term capital such as public funds, social security, insurance, and annuities increased its holdings of the circulating market value of A shares by more than 50%. The market functions for investment and financing coordination have been continuously improved.

Fidelity Fund stated that at the start of the “15th Five-Year Plan,” the government work report again emphasized “improving the share of direct financing and equity financing.” This wording is not a simple echo of the policy cycle, but a strategic leap of the capital market—from “financing tools” to an “innovation ecosystem cornerstone.” In the new coordinate system for building a financial power, direct financing is moving from a financing channel toward a resource allocation hub.

The institution further analyzed that through successive leaps, the capital market has completed a transformation of identity—from the periphery to the hub, and from tools to the main body. Over the past five years, the share of direct financing rose to 31.97%, up by 3.2 percentage points compared with the end of the “13th Five-Year Plan.” Equity financing reached 5.9 trillion yuan, cash dividends were 10.7 trillion yuan, and a market pattern in which investment and financing functions develop in coordination has initially taken shape. In the CSI 300 index, the share of strategic emerging industries reached 45%, and the “toward new and toward better” characteristics have been continuously strengthened. The share of long-term capital increased to 50%, significantly enhancing the market’s inherent stability. These accumulations of simultaneous growth in both quantity and quality provide a solid foundation for deepening reforms in the “15th Five-Year Plan.”

Yuan Chuang, Chief Economist at Cinda Securities, also pointed out that, on the whole, the capital market’s scale, structure, and quality are achieving a new round of leaps, and the driving force for developing “toward new and toward better” continues to gather. Market resilience and the ability to withstand risks are also clearly improving, and the stock market’s barometer role is becoming even more prominent. In the process of stabilizing employment, stabilizing businesses, stabilizing the market, and stabilizing expectations, it is playing an increasingly important role.

“The ‘15th Five-Year Plan’” anchors five directions for high-quality development
Precise service for new productive forces

Wu Qing said that the “15th Five-Year Plan” period is a critical time to consolidate the foundation for basically realizing socialist modernization and to fully step up efforts, and it is also a key stage for the capital market to move toward high-quality development. The CSRC will work with relevant parties to implement the “15th Five-Year Plan” deployment, focus on serving Chinese-style modernization and the building of a financial power, coordinate efforts to prevent risks, strengthen regulation, and promote high-quality development, and strive for new progress in five areas.

First: the market is more resilient and more solid.

“Stability is the overall situation, the premise, and a necessary requirement for high-quality development of the capital market.” This is Wu Qing’s core positioning for the stable development of the capital market. He proposed that the CSRC will continue to promote the coordinated efforts of all parties, improve the market mechanism and ecosystem for “long money and long-term investing,” improve the construction of a China-style mechanism for stabilizing the market, enrich the tools and mechanisms for countercyclical and cross-cycle adjustment, and further enhance the market’s inherent stability.

In this regard, Yan Xiang, Chief Economist at Founder Securities, analyzed that promoting a market that is more resilient and more solid requires coordinated efforts from two aspects: stability of the internal structure and external institutional guarantees.

On the one hand, by improving the market investment ecosystem and the investor structure, the inherent volatility of the capital market can be fundamentally reduced. On the other hand, by enriching the toolbox for countercyclical and cross-cycle adjustment, promoting the normalization and institutionalization of cross-cycle and countercyclical adjustment and risk monitoring and early-warning, a “firewall” and “shock absorber” for the capital market to respond to extreme shocks can be built. This can effectively curb irrational market volatility, prevent the cross-infection of risks, and thus form a joint effort with the inherent stability brought by “long money and long-term investing,” jointly driving the market toward inherent stability and long-term development.

Second: the system is more inclusive and more adaptable.

Regarding institutional building, Wu Qing proposed deepening comprehensive reform of investment and financing, further improving the basic systems of the capital market, actively developing diversified equity financing, expanding the exit channels for private equity and venture capital funds, strengthening the construction of bond, REITs, and asset securitization markets, and continuously enriching products and tools to serve the development of new productive forces in a more precise and effective manner. Meanwhile, efforts will be made to steadily develop futures and derivatives markets to better meet enterprises’ and residents’ needs for risk management.

China AMC pointed out that the more the capital market needs to enhance inclusiveness and adaptability for the development of new productive forces, the more public funds—the important participants in the capital market—should improve the quality and effectiveness of their support for the development of new productive forces, and earnestly play the role of a “stabilizing anchor” and a “stabilizer.” On the one hand, public funds should promote technological innovation by making direct investments in areas related to new productive forces, ensuring that financial “fresh water” flows continuously to industries that meet the needs guided by national strategies. On the other hand, public funds should place emphasis on the signaling role of their science and technology innovation funds. While making existing stock of science and technology innovation fund products more refined and stronger, they should also issue more thematic funds covering industries related to new productive forces, guiding financial resources to keep flowing to key core areas and to innovative enterprises that truly possess hard-technology attributes.

Third: the quality of listed companies is higher, and the structure is better.

Listed companies are the core carriers of the capital market. Wu Qing made it clear that the focus of improving the quality of listed companies is, on the basis of continuously and strictly cracking down on the “authenticity” of listed companies, to further enhance their “investability.”

Fourth: regulation and law enforcement, as well as investor protection, are stronger and more effective.

Wu Qing proposed that the CSRC will adhere to governing the market according to law, promote the improvement of a legal system for the capital market, and advance market reform and development at all times along the track of rule of law. It will accelerate the development of regulatory digitalization and intelligentization to precisely and forcefully crack down on malicious illegal acts such as financial fraud, market manipulation, and insider trading. It will also continuously improve the system for protecting investors’ lawful rights and interests, among other efforts.

Fifth: opening up to the outside world moves to a deeper level and higher standard.

Wu Qing said that, at present, international investors’ demand for diversified asset allocation is increasing, and the attractiveness of “Chinese assets” has clearly improved. Against this backdrop, the CSRC will use efforts to build a first-class, market-based, rule-of-law, and international business environment as a starting point. With improving the convenience of cross-border investment and financing as the direction, it will further promote two-way opening-up to a new level in areas such as the market, products, services, and institutions, and create a more transparent, stable, and predictable market environment. At the same time, it will take an in-depth part in reform of international financial governance, strengthen cooperation on cross-border regulatory enforcement, and continuously improve regulatory oversight and risk prevention and control capabilities under conditions of opening up.

Cover image source: Zhu Yu