Experts predict that there will be a “capital big bang” in the Chinese capital market in the upcoming “beautiful new 10 years”. How are the supervisors supposed to react to this “big bang”?

Firstly, let’s take a look at the current situation. The transfer of approval power of refinancing to lower levels and the launch of “new three plates” are already at hand. This is the first step of deregulation from the supervisors.

Secondly, let’s look into the near future. The administrative approval mechanism reforms in security market and futures market continue deepening. Some administrative approval power can be transferred to lower levels or canceled.

Lastly, by looking further into the future, can we assume that substantial approval mechanism will end by the end of “beautiful new 10 years”?

The end of substantial approval?

In the next 10 years, with the further implementation by the supervisors of the marketization of IPO approval centering information disclosure, the substantial IPO approval mechanism still with strong administrative color might come to an end.

Although under current condition IPO approval cannot be completely canceled, there are ways to gradually realize it. For example, the supervisors can try transferring first trial judgment to intermediaries, while China Securities Regulatory Commission (CSRC) only responsible for final veto. This would raise efficiency and ease CSRC’s burdens.

New position of exchanges

Currently there is a lot of overlapping in the supervision functions between CSRC and security exchanges. In the next 10 years, if deregulation and strengthened supervision are realized, it’s more likely that the overlapping part will be dealt only by security exchanges.

Furthermore, it is expected that there will be increasingly intense competition among security exchanges in the upcoming 10 years.

Expansion of inspection force

The expansion of CSRC’s inspection force is indispensable to the supervision change in the “beautiful new 10 years”.

Cao Fengqi, a professor at Guanghua School of Management of Peking University said pointed out that CSRC is a “supervision and management commission”, therefore, CSRC’s most important functions are to supervise and manage, so as to strictly investigate and treat illegal acts, to maintain a fair, open and impartial market order. Currently the number of inspectors is only one sixth to that of America. Thus this number is expected to be increased sharply with the effort made by CSRC in the next 10 years.