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Required by internationalization, many need to be revised or replaced by new rules and regulations. This is an extremely arduous task. China’s first reaction following its accession to the World Trade Organization (WTO) was to open up its stock market. China’s securities market will be integrated with the global capital market. As a matter of course, some practices will become obsolete and new rules must be adopted.
Cao Fengqi, Deputy Director of the Drafting Group of the Investment Fund Law, said that after China’s WTO entry, corresponding amendments will be made to Chinese laws and regulations in relation to the securities market in line with international rules. Amendments and supplements will be made for provisions in the Corporation Law and Securities Law in discord with WTO rules.
Meanwhile, some legal experts do not believe the time is ripe for revision of the Securities Law. They argued that the existing Securities Law has been implemented for a short time, just two year, and its defects have not been fully exposed. Under such circumstances, they believe rushed amendments cannot easily achieve expected result.
Active preparations are being made for revision of the Securities Law. The former Securities Law drafting group of the NPC Financial and Economic Committee has hold a high-level symposium jointly with related departments in April 2002, discussing specific matters concerning the revision of the Securities Law. A proposal for amendments and supplements may involve aspects such as the legal regulation of the civil liability system, especially the civil compensation system, new securities products such as stock index futures and stock options and improvement of the securities market system and the delisting mechanism for listed companies.
In short, following WTO accession, the market operational mechanism and regulatory rules will gradually be linked with international practice. This will enable China’s capital market to become mature.[xxxvii] Yao Erqiang , Director of the Finance and Securities Institute of Beijing Technology and Business University, stated that WTO entry brings about challenges as well as opportunities, and disadvantages as well as advantages to China’s securities market.
Conclusion
Many of the issues that exist in the context of disclosure exist in the general context of economic law in China. While the State once concentrated its efforts on macro-issues or as a market participant, it must now be a market referee. This role is an unfamiliar one for the State since it can no longer rely on its vertical organisation to simply direct people’s actions.
With the rapid development of China’s securities market in 10 years, the securities industry in China is still in its infancy. Owing to stock issue by quota in the early stages, many local governments regarded the stock market as means to relieve State-owned enterprises of their difficulties. Furthermore, the market lacks basic transparency and the disclosure of market information is seriously asymmetric. Some listed companies, intermediary institutions and accounting firms collaborate in the public offering of companies with poor asset quality. As a result, the securities market cannot give play to its basic role of optimizing resource allocation and improving economic returns.
In Australia, the situation with the new reform is yet to be tested. We need to see if the implementation of the Financial Services Reform Act will have the expected effect. Hopefully the result will be the success of the implementation of the provisions related to disclosure in general and prospectuses in particular. This reform is expected to happen in China soon.
Following after China’s WTO accession, some commentator and regulator have been aware that the promulgation of new laws in order to face the WTO challenge may not be enough. As CSRC Vice-Chairwoman Shi Meilun noted[xxxviii] that the securities market on the mainland is facing many problems, including a low level of market transparency and malpractice. She suggested that China should build an administrative apparatus to enforce those laws and pry open the closed world of Chinese enterprises. And also, Chinese government may have to increase its transparency of government processes that affect the market and allow more opinions to circulate.
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