Boosting Stock Market Development and Governance Efficiency Suggestions

Suggestions for Boosting Stock Market Development and Governance Efficiency

The stock market, real estate market, and bond market are all facing issues that require not only verification but also resolution. The capital market is a crucial pillar supporting China's economic development. The healthy development of China's stock market currently requires improvements at the technical level, governance at the environmental level, and more importantly, the perfection and governance at the institutional level. Here are a few suggestions for boosting and governing the healthy development of the stock market.

Firstly, adhere to market principles. The stock market is a platform for investment and financing, and its core issue is to protect the interests of enterprises and investors with scientific and reasonable systems. Whether a company goes public is a choice of its investment and financing method. The choice of investment and financing methods, equity structure, and whether to go public, as well as when and how to enter the capital market, are matters for the company, and the government should not treat them as work targets and performance indicators to be achieved. Not all good companies need to go public, and not all listed companies are necessarily good. It's not the case that the more listed companies, the better. We must follow market principles, where supply and demand will naturally balance out prices. The basic function of a company going public is to raise funds, not to "raise money" indiscriminately. The core function of the stock market is to help enterprises establish a scientific equity structure and modern corporate systems. As a listed company facing a vast number of investors and fierce competition, the responsibility and pressure are unprecedentedly immense.

Secondly, quality leads to price increase. The performance of a company is the foundation of stock price increases. Listed companies, as public enterprises, should provide the greatest return to investors in terms of corporate quality, profitability, and dividends. Creating wealth and profitability is the royal road for enterprise development and the basis for survival and growth. Only by bringing real benefits and returns to investors can a company gain their trust and support. The stock price is a reflection of the company's value and the investors' recognition of that value. As long as the company's operating performance is good, the stock price will rise; poor quality naturally leads to low prices.

In China, if the performance of most listed companies significantly improves, it is impossible for the Shanghai Composite Index to linger around 3000 points for over a decade. Companies can only provide a solid value foundation for stock price increases by continuously innovating, improving corporate quality, and profitability, thus bringing vitality and a source of increase to the stock market. It is the responsibility and key to development for companies to provide reasonable returns to investors.

Thirdly, design the stock market system reasonably. On December 19, 1990, the Shanghai Stock Exchange officially opened, marking the birth of China's stock market. The development of the stock market over the past 30 years has made a significant contribution to China's economic development. To adapt to new situations and environments and solve the current development dilemma, the most important point is to improve institutional construction, govern the investment environment, protect investors' interests, enhance investors' confidence, and ensure the fairness of market transactions. Outdated measures should be cleaned up to maintain the adaptability and systematicity of the system to national conditions. Some systems and measures that are not conducive to the long-term healthy and stable development of the stock market, such as securities lending, quantitative trading, and share reduction, can be suspended. The registration system should be improved with related foundational supporting systems to prevent the mixing of good and bad and the exploitation of institutional loopholes. It is essential to firmly crack down on illegal speculation and short-selling behaviors. Efforts should be made to reduce things that are not conducive to protecting the interests of small and medium investors, serving the interests of a dominant shareholder, and institutional speculators. Scientific and reasonable systems often play a fundamental and decisive role; reasonable rules can produce stability. From an institutional guarantee perspective, we can solve the phenomenon of the stock market failing to act as an economic barometer in China.

Fourthly, strengthen regulation and emphasize punishment. Although the systems in China's capital market cannot be said to be perfect, the main systems are in place, such as listing systems, delisting systems, and trading systems. The current issue is how to strengthen regulation and strictly enforce the systems. For example, we now have more than 5,000 listed companies, but how many have been delisted? Especially for companies that intentionally engage in fraud, how severe are our punishments? For some listed companies that violate regulations and cause losses to investors, how much compensation do we provide? Sometimes, lax systems are worse than having no systems at all. When the cost of violating regulations is lower than the benefits of violating regulations, some people will be willing to take the risk of violating regulations. Therefore, violators must be strictly regulated and severely punished, and relevant departments must fulfill their duties and take strong actions. The market economy is a rule-of-law economy, and the capital market has great temptations, wide involvement, and many blind spots, which require the use of heavy hammers.

Fifthly, regulate public opinion guidance and create a favorable environment. Investment is a personal matter for investors, and investment carries risks, which is an economic common sense. The problem is that with many stockholders and small and medium investors lacking professional knowledge, few investment channels for residents, a small proportion of professional institutional investors in China's stock market, and information asymmetry, the public opinion situation in the capital market has a particularly significant impact. Nowadays, there are many shameless comments on the stock market, and stock reviews and recommendations are ubiquitous on some media and online platforms. False, exaggerated, excessive, and misleading propaganda are often heard, causing some small and medium investors to suffer investment losses. Who has pursued compensation responsibility? Over time, this leads to a lack of confidence and disappointment among investors. Stock market investment is an investment in the future, confidence, and trust. Without the vast number of small and medium investors, the stock market loses its foundation. Therefore, it is essential to strictly regulate stock market propaganda and stock reviews, and stop the chaos of misleading public opinion in the capital market. It is crucial to restore investor confidence and trust at present, which is as important as gold. As long as we insist on innovation, development, and strict management, China's stock market will have a promising future.