CSRC Chairman's speech at Asian Financial Forum(2)

Secondly, please allow me to brief you the reform measures we have recently adopted.

The 12th Five-Year Plan highlights the importance of the capital market in China's economic growth and development. In recent period, we have taken significant measures to deepen capital market reform.

First, to further loosen governmental direct control. Regulators shift their focus from market access control to supervision on behavior and operation. Last year, we have dismantled 35 approval items. Another 10 items will be cancelled after law amendment.

Second, to encourage long term investment. We have adopted a differentiated dividend tax policy for retail investors based on holding period. We have improved and encouraged the employee-holding schemes. To reduce trading costs, the exchanges have lowered charges and fees three times last year.

Third, to deepen IPO reform. Attention has been shifted from a material judgment on profitability to information disclosure in IPO reviews. We will tighten the scrutiny on pricing for IPOs, improve the pricing mechanism, and reduce speculation of new shares on the secondary market, so that the primary market and the secondary market can develop in a balanced way.

Fourth, to improve delisting system. Based on the previous delisting system, we have introduced several market-oriented criteria, established risk warning system and a preparation mechanism, and allow failed companies to relist after restructuring. Now, listed companies can enter or exit the market, or they can even choose to delist voluntarily. Delisting will become more regular.

Fifth, to increase dividend payout by listed companies. While fully respecting the autonomy of listed companies, we encourage them to formulate on-going cash dividend payout policies and decision making mechanisms, which should be clear and transparent. Currently, the dividend yield ratio for large listed companies or blue-chips in particular, is not only higher than that in other emerging markets, but also outperforms some mature markets. For example, the dividend yield ratio for CSI 300 index reached 2.66% in 2012, compared with 2.24% for S&P 500 index.

Sixth, to build a multi-tiered capital market. While improving the main board and the SME board, we also try to develop an OTC market, by setting up the national SME stock transfer system, or the so-called "new third board", and try to bring the regional equities trading venues under regulation.

Seventh, to promote the development of corporate bond market. An inter-ministry coordination mechanism was set up to develop the corporate debt market. Now, the regulatory standards are more coordinated; the inter-bank market and exchange-traded market are more interconnected; cross market law enforcement is more effective. In addition, we have launched SME private placement bond, the so called high yield bond, which raised a total of 8.41 billion RMB Yuan by the end of December last year. Those products can provide more diversified channels for SMEs to raise funds.

Eighth, to nurture more institutional investors. We have eased the rules to attract social security funds, insurance companies, trust schemes, private equity funds and other professional institutional investors, and encourage the development of various kinds of wealth management products and agencies. We have made great efforts to bring in long term overseas investors. Last year, we added another 50 billion US dollars to the total investment quota for the QFII scheme, and increased the RQFII investment quota by 250 billion RMB Yuan. Three exchanges conducted the first global road show to overseas institutional investors, which have generated encouraging results.

Ninth, to strengthen law enforcement in the market. We have improved the legal structure, and stepped up for enforcement, with zero tolerance towards violations. Last year, we have initiated investigation of 143 cases, which is 24% higher compared with the year before. Among them, 113 cases have been formally filed, growing by 20%, and 33 cases have been submitted to the public security authorities, increasing by 32%. Beside that, 77 cases of administrative penalty have been completed.