China amends Securities Law to boost slumping stock market

The draft amendment of China's Securities Law was submitted Tuesday to China's top legislature for first deliberation. The drafters of the amendment said it would boost investors' confidence and therefore rejuvenate the slumping stock market.

Although April 25 saw China's stock market falling to a record low for the past six years, Xu Jian, director of the Security Law amendment task force under the Financial and Economic Committee of the NPC Standing Committee, was optimistic about it's future, saying that the amendment fixes flaws in the stock market supervision system and adds new items for protecting the interests of investors.

According to the draft amendment, a special fund for protecting investors will be established.

In the past, if stock exchanges lost money, they routinely embezzled customers' money to make up their own loss. Customers' cash saved in the stock exchange could not be retrieved at all, triggering great anger among stock market investors.

The special fund will be established to return embezzled cash to investors, Xu said.

The amendment stipulates stock market investor's cash trust must be saved in the commercial banks, rather than stock exchanges.

It means stock exchanges have no chances to embezzle money in future, Xu said.

In the past, stock buyers were often cheated by wrong information which were released by listed companies or stock exchanges and finally lost money.

This time, the amendment stipulates that the organizations or individuals who cheated stock buyers must bear legal responsibilities.

Shen Chunyao, member of the NPC Standing Committee, said China has more than 70 million stock market investors. "Their confidence toward the market attaches great importance to the rejuvenation of the stock market," he said.

Cheng Siwei, vice chairman of the NPC Standing Committee, said in a bid to boost stock buyer's confidence, the most important issue is to guarantee a proper proportion of stock buyers could earn money from the stock market.

"In the past, China's stock market was easy for listed companies to finance, but difficult for ordinary stock buyers to get returns," Cheng said.

He said that in a bid to ensure stock buyers to get returns from the stock market, improving the quality of listed companies is very important.

Currently, China has more than 1,300 listed companies. "But in my view, only a small number of them deserved to be invested," Cheng said. He suggested that a flexible stock market entrance and exit system should be established, in a bid to ensure unqualified listed companies to exit the stock market and qualified companies to be listed in time.

Source: Xinhua