Central bank outlines reforms needed for sound market development
The People's Bank of China (PBC) released a report in the wake of last week's stock market plunge, illustrating the government's inclination to keep the domestic stock markets growing in a sound manner, analysts said Sunday.
The report also outlined the plans for setting up a trading board for innovative enterprises on the Shanghai Stock Exchange (SSE), although experts have expressed doubts about its necessity.
The China Financial Stability Report 2015, which the PBC published Friday, outlined the targets for needed reforms in the domestic financial sector, including an appeal for measures to be taken to keep China's stock markets developing in a sound manner.
According to the report, China's main boards and SME board, a sub-board of the Shenzhen Stock Exchange for small and medium-sized enterprises, should continue to grow in 2015. The PBC's instructions on domestic stock markets arrived at a time when the A-share stock markets plunged more than 6 percent Thursday, bringing a seven-day streak of gains to an end on the Shanghai and Shenzhen exchanges.
The Shanghai Composite Index continued shed another 0.18 percent Friday.
The PBC report shows an inclination on the part of China's central government to keep the domestic stock markets growing stably, said Lian Ping, chief economist at Bank of Communications.
However, that does not mean that the government would give blind support to the stock markets if they demonstrate unreasonable performance such as dramatic fluctuation, Lian said.
"It's the government's responsibility to urge domestic investors to be cautious after any sharp rise on the stock markets," Lian told the Global Times Sunday.
The report also shows the government intention to clamp down on risk in the domestic stock markets, said Lu Qianjin, an associate professor at the International Finance Department of Fudan University.
The PBC report also mentioned that the SSE will set up a new board, in a bid to encourage the development of innovative enterprises.
SSE Deputy General Manager Liu Shi'an said last week that the new board will cater to innovative companies with a specific scale of revenue, the financial news website wallstreetcn.com reported Sunday.
In terms of listing conditions, Liu said that the SSE would pay more attention to whether the companies could make sustained profits, rather than focus on short-term profit-making capability.
The board is a waste of money because it would have a similar function to ChiNext, the country's NASDAQ-style board, Pi Haizhou, a financial commentator, told the press Wednesday.
Lu nevertheless noted that the board is a timely response to the government's call this year for nationwide innovation and entrepreneurship.
