Institutional arrangements and regulationof the capital market were strengthened
The establishment of institutional arrangements for a multi-layered capital market made progress. The China Securities Regulatory Commission (CSRC) issued the Interim Measures on Regulation of Regional Equity Markets, which established criteria for qualified investors and a scheme for looking-through the ultimate investor and an arrangement for investors’ fund management, clarified the scope for intermediary businesses within which operating institutions can become involved and their corresponding obligations, and strengthened market self-regulation. The Measures unify regional equity market businesses and regulatory rules, thus they will help improve regulatory coordination, combat illegal activities, prevent a regulatory vacuum and regulatory arbitrage, protect the legitimate rights and interests of investors, mitigate and resolve financial risks, and promote the sound and stable development of regional equity markets.
Regulation of securities firms, securities investment fund management companies, and futures companies was strengthened. First, the CSRC issued the Measures for the Administration of Securities Fund Management Companies toclarify the respective responsibilities of the board of directors, the board of supervisors, the senior management, and compliance managersin order to improve compliance, strengthen the accountability of those violating the rules, regulations, and laws, improve the effectiveness of compliance management, strengthen self-regulation, and promote sustained and healthy development of the industry. Second, the CSRC released the Measures for the Administration of Risk-based Regulation Indicators of Futures Companiesand supporting documents, which raised the minimum net capital requirement to RMB 30 million, provided for detailed haircut rules based on liquidity, recoverability, and risks, adjusted the scope and standards of risk provisions for asset management businesses, improved the applicability and effectiveness of the system of risk-based regulation indicators in the futures industry, and strengthened supervision over futures companies.
The regime for shareholding reductions of listed companies was further improved. The CSRC issued the Rules on the Sale of Shares by Major Shareholders, Directors, Supervisors, and Senior Management of Listed Companies, improving the regimes for block trading and shareholding reduction information disclosures, and guidingthe controlling shareholders, directors, board of supervisors, and senior management of listed companies toreduce shareholding in a law-abiding, rational, and orderly manner, which will help promote stable operations of listed companies, reward small- and medium-sized investors, support market confidence, and protect the legitimate rights and interests of investors.
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Institutional arrangements for regulation of the insurance industry were reinforced
First, risk controls were strengthened. In the Circular of the China Insurance Regulatory Commission on Further Strengthening Insurance Regulation to Maintain the Steady and Sound Development of the Insurance Industry, the China Insurance Regulatory Commission (CIRC) identified nine notable risks in the insurance industry, namely liquidity risks, risks in investments, strategic risks, risks in new insurance businesses, risks from external contagion, risks of mass disturbances, risks in data authenticity and accuracy, risks of leveraged capital stock, and reputational risks, and it raised specific requirements for risk controls. Second, the governance rules for insurance companies were improved. The CIRC issued the Guidelines for the Articles of Association of Insurance Companies to establish mandatory articles in the Articles of Association and to define the detailed rights and obligations of insurance companies and their shareholders, directors, supervisors, and management. Third, insurance companies were encouraged to support the real economy. In the Guidelines for the Insurance Industry to Support the Real Economy, the CIRC enhanced support for insurance companies to invest in Public Private Partnership (PPP) projects andin financing for the agro-linked sector, small businesses, and infrastructure construction so as to guide the industry to better serve the national strategy and development of the real economy. Meanwhile, the Notice on Investments in Priority Projects by Debt Investment Plans was issued to improve the efficiency of registration, to scale back the requirements for credit enhancement, and to facilitate investments by insurance funds in the real economy. Fourth, insurance funds were allowed to invest in the Shenzhen–Hong Kong Stock Connect Program. The CIRC issued the Regulatory Rules on the Pilot Program for Insurance Fund Investments in the Shenzhen–Hong Kong Stock Connect Program, allowing insurance companies to make southbound investments, either directly or through securities investment funds, under the Shenzhen–Hong Kong Stock Connect Program. Fifth, the commercial auto insurance reform was deepened. The CIRC reduced the floating coefficient of the commercial auto insurance premium from 0.85 to a range of 0.70–0.75 (varying across provinces), and further expanded the independent pricing power of insurance companies.
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