--Reflections on the current stock market

Editor's Note: The current stock market crash has attracted close attention from people at home and abroad.2015surname Nian6moon15Starting on the day ofAAn unprecedented "stock market crash" erupted in the stock market, with the Shanghai Stock Exchange Index plummeting in less than a month.1,800points, down about35%Most of the stocks were even "cut". To7moon8day, the Shanghai Composite Index has accumulated a decline of nearly30%The SME and GEM indices have lost nearly all of their value. The SME and GEM indexes have even lost nearly40%.. The stock market crash has madeAThe stock market value has evaporated almost20trillion dollars, leaving many stockholders with heavy losses. Especially at the beginning of the new year, theAThe stock has experienced4sky4After the meltdown, this controversial "short-lived" policy was officially called off. People can not help but ask: the United States of America's mature "meltdown" mechanism, but in China will cause the stock market almost full stop? With a series of questions, we visited Mr. Xu Shimin, who was involved in the early construction of China's securities market and is still active in China's capital market today.

Mr. Xu Shimin: engaged in banking and securities management50Years. A veteran of China's securities market, and an important participant and witness to the establishment and development of China's capital market.1990surname Nian7He has been involved in the establishment of Shanghai Stock Exchange, Shanghai Securities Central Registration and Clearing Corporation and United Securities Company Limited since January, 2010, and served as a senior manager of the company. He was appointed as a part-time professor at the School of Finance and Economics of Renmin University of China, a part-time professor at the School of Securities and Futures of Shanghai University of Finance and Economics, and a member of the expert review team of the People's Bank of China and the China Securities Regulatory Commission for the "China National Debt Book-keeping System", and an expert consultant for the research group of the "Integration of China's Securities Markets" (a China-aided project of the Asian Development Bank).2006surname Nian7In January, he was appointed by the Leading Group of the China Securities Regulatory Commission (CSRC) to teach the topic of "Correctly Understanding the Improper Transaction Behavior of the Securities Industry and Scientifically Establishing a Long-term Mechanism for the Control of Commercial Bribery" in the Training Course on the Control of Commercial Bribery in the Securities Regulatory System.

Newsweek Asia; Mr. Xu! It's a pleasure to meet you. First of all, please introduce yourself.

Xu Shimin: I'm a man who's been around the stock market for a while25More than a few years old in the brokerage industry.1990Since 2007, he has participated in the preparation and construction of Shanghai Stock Exchange, Shanghai Securities Central Registration and Settlement Company, and United Securities Limited Liability Company. Currently, he is the executive director of Beijing Oriental Gao Sheng Investment Consultant Co., Ltd. and specializes in corporate mergers and acquisitions business. It can be said that I am a person who has come all the way from market organizer - market participant - market service provider. Here, I would like to talk about some of my superficial experience of the current market, only personal opinion for your reference.

Newsweek AsiaMr. Xu, how do you comment on the current problems of the stock market?

Xu Shimin: The current Chinese stock market is really puzzling, obviously there is a problem with the market itself, the profit-minded people have, crazy disruptive people have, deliberately destructive people have. However, here I have more to say about some of the problems of regulatory thinking.

Newsweek AsiaCould you be more specific?

Xu Shimin: That's what I think:25The practice over the past years has proved one thing: it is very difficult to achieve success, or even complete failure, if we copy the foreign set in all matters. There are three specific aspects. For example, the vigorous development of institutional investors (even proposed "extraordinary development"), the result is the emergence of "fund shady", "rat position", insider trading, transfer of benefits and so on. A series of illegal and criminal behaviors. The development of institutional investors, due to its management specialization, structural combination and standardization of behavior and other factors, from the reduction of transaction costs, improve market efficiency, or its positive significance. However, in our country there is a widespread problem of increased moral risk due to the emphasis on talent rather than morality as well as low opportunity cost of illegal and criminal behavior, which leads to the occurrence of a series of problems mentioned above. I remember the early days of the SSE, the late old financier, the Shanghai Stock Exchange preparatory group - one of the "three-person team", the former Bank of Communications, the first chairman of the Board of Directors, Mr. Li Xiangrui, in the discussion of institutional investors, hit the nail on the head when he said: "Institutions are scalpers (speculators)", now it seems that he really hit the nail on the head.

Newsweek AsiaWhat about the second one?

Xu Shimin: The sponsor system for stock issuance has indeed been effective in Hong Kong, a tiny place with a relatively strict sense of legal system and integrity system. Comparatively speaking, the implementation of the system in the Mainland seems to be very strict in theory, but the actual implementation of the system has revealed a number of shortcomings. First of all, the sponsor qualification must be examined, this test system for fresh graduates is very favorable, and for investment bankers with considerable work experience is more difficult; the result appears to be out of the test can not do, do not qualify for the project. Especially in the distribution mechanism as long as the test out of the annual salary of one or two million dollars, the project signing fees80million dollars, plus a few million in project withdrawals. It is not a fantasy for individual sponsors to earn tens of millions of dollars a year. However, what is the actual effect? There are financial fraud, misrepresentation, fraudulent listing, and even listed in the loss of the year the strange things. In the final analysis, there is still a series of fundamental problems such as the awareness of the legal system, the integrity system, the risk of moral hazard and the low opportunity cost of crime. Therefore, I personally believe that, even if the implementation of the "registration system", we can not follow the example of the gourd, blindly copying and copying.

Newsweek AsiaAnd the last one?

Xu ShiminThis is the issue of the "fusion" mechanism in the trading system that we have been focusing on. In the United States.1988surname Nian10moon19day, i.e.1987On the first anniversary of the stock market crash of 2007, the U.S. Commodity Futures Trading Commission (CFTC) with the Securities and Exchange Commission (SEC) approved the New York Stock Exchange (NYSE) and the Chicago Mercantile Exchange (CME) of the fusion mechanism in subsequent18In the middle of the year, the U.S. did not have a major stock market crash. AndAThe stock has experienced early in the year4sky4After the second meltdown, the controversial "short-lived" policy was officially halted. The China Securities Regulatory Commission (CSRC) had to admit that "the negative effects outweigh the positive ones." Before policymakers gave the go-ahead for implementation, they overlooked a common-sense issue - the U.S. stock market has no limit on up and down stops. The establishment of the melting mechanism for market transactions to provide a "shock absorber" role, in essence, is set up before the opening of the stop system of a transitional gate to the market to a certain period of time to calm down, in advance to warn investors of the risk, and for the relevant parties to take the relevant risk control measures and measures to win the time and opportunity. However, under the current situation where our investors generally lack confidence in the market, the melting mechanism has accelerated the fall of stock prices. Therefore, the management has made a common-sense mistake.

Newsweek Asia; It was very inspiring to hear you express yourself, could you summarize it?

Xu ShiminIn short, I think the crux of the problem lies in the phrase "not adapting to the local conditions, copying and imitating blindly, but the result is counterproductive." No wonder some people say: Chinese officials lack common sense.

Newsweek AsiaXu: In this way, China's stock market does have problems, it all depends on the management to continue to improve the wisdom of the correct management of the market, and strive for ease of use.

Xu ShiminThe market economy is nothing more than three means! Market economy is nothing but three means: regulating the market by means of the rule of law, regulating the market by means of the economy, and regulating the market by means of administration. All three are indispensable, but different periods of focus. I would like to use the following facts of personal experience to encourage everyone's morale.

Newsweek AsiaWhat exactly?

Xu ShiminLet us look back, our capital market has had a remarkable record of public entrepreneurship and independent innovation, which has impressed the world. First of all.1990surname Nian12moon19The Shanghai Stock Exchange, which was opened on January 1, was the first stock exchange in the world at that time to utilize computerized summary transactions for the entire market, which was appreciated by its counterparts in various countries, as it crossed over the process of verbal price calls by its overseas counterparts and became a one-step process. Secondly.1992surname Nian7moon1The stock exchange that implements stock accounts on a daily basis and automatically completes transfers and settlements after daily trading; and confirms whether or not there are securities when selling, and then effectively stops short-selling behavior. Lastly, on this basis, the stock exchange market was completed with a series of shareholder rights and interests type services such as paperless issuance of treasury bonds, on-line pricing issuance, share delivery and distribution, dividend payout, and so on. These achievements have continued to this day without any major problems and have been emulated by overseas counterparts. It can be said to be world-renowned and unprecedented. As I have had the privilege of participating in the concrete practice of the above reforms, I am authorized and qualified to say these words.

Newsweek AsiaIt's really inspiring. And how do you feel about these events?

Xu ShiminYes! Practice eloquently confirms that in all things we have been able to hit the ground running with these independent innovations and achieve success, as well as sustained and healthy development over the long term. But some people tend to be blind to these things worthy of overseas learning, but chattering appreciation of foreign things. Regrettably, when they regard the foreign ones as treasures and apply them rigidly, the result is counter-productive and they will end up with a bloody headache. I think all this will be a blow to the so-called expert scholars, technocrats who worship foreign countries and returnees who think everything is good in foreign countries. They should be advised to be more objective and realistic.

Newsweek AsiaLastly, what other words of advice do you have for the management?

Xu Shimin:: I can't talk about advances, just a little advice. First, the source of securities regulators must be diversified, and at present the source of regulators is still mainly government officials, experts, scholars and university students. Recruitment information from the China Securities Regulatory Commission (CSRC) has confirmed that legal and financial practitioners are the main source. History is a mirror, from the development of the domestic securities market for more than twenty years, from the successful experience of the development of the international securities market, all prove the importance of the selection of the chairman of the CSRC, can also be said to be related to the future of China's securities market market reform and development of one of the important factors. From the domestic point of view, the successive chairmen of the China Securities Regulatory Commission have come from large banks, none of them have had practical experience in the securities industry, seems to be purely in accordance with the administrative level of configuration, not in line with the market attributes of the securities market itself, does not reflect the market in the chairmen of the configuration of a decisive role. From the perspective of the United States, the first four terms of the Securities and Exchange Commission and the most recent10Most of the chairmen who have been in office for many years have worked as lawyers and in securities-related legislative and administrative work, as well as in the stock exchanges and the Securities and Exchange Commission, reflecting an atmosphere of regulation by law and specialized expertise.

Newsweek AsiaWhy does the chairman of the China Securities Regulatory Commission have to be a bank governor?

Xu Shimin: The China Securities Regulatory Commission (CSRC), as a full ministerial-level institution directly under the State Council, belongs to the State Council directly under the State Council, rather than a constituent department of the State Council, and is authorized by the State Council in accordance with the laws, regulations and the State Council to unify the supervision and management of the nation's securities and futures markets, to maintain the order of the securities and futures markets and to safeguard their lawful operation. As China's financial industry in the past is a mixed business, securities companies in the past is still very small, had to enable the mixed business experience and experience of bank presidents, as the chairman of the China Securities Regulatory Commission, but also excusable. But China's financial industry has been operating for many years, some of the best securities companies have been listed and become a financial holding group, or to enable or not mixed operations, after the separation of securities experience and experience of the vice president of the Bank of China and the governor of the big banks, as the chairman of the CSRC, is incomprehensible to the people. The configuration of the successive chairmen of the CSRC is obviously applying the administrative level of state organs. The fact is also true that the successive chairmen of the CSRC have had the experience of bank governors, three of whom have served as president of the China Construction Bank. At the same time, from the regulatory philosophy of the successive chairman of the Securities and Futures Commission is roughly the same, when the market soars to grasp the norms, the market downturn when talking about development. The whole idea around two goals, that is, two "out" word: First, the market can not be in trouble, otherwise it will affect the reform of the overall situation; the second is the stock to send out, otherwise there is no financing function of the market there is no need to exist. However, only the previous chairman of the Securities and Futures Commission, Guo Shuqing, two hands, one hand, strict supervision to promote the standardization of the other hand, pay close attention to innovation and development, is really rare.

Newsweek AsiaDo you think that brokerage executives can also serve as SEC chairmen?

Xu Shimin: As far as China's securities market is concerned, the allocation of the chairman of the Securities and Futures Commission should be the allocation of human resources that is of most concern to the main bodies of the securities market, including securities issuers and securities investors, so that the market can play a decisive role in it. Securities companies as the main securities and equity holdings of funds and futures of the largest intermediary institutions, brokerage firms commonly known, the status of intermediary indicates that it links the securities market subject. The securities market is clear market attributes call for brokerage executives to serve as chairman of the Securities and Futures Commission, is a wise and objective choice, not only necessary and urgent. Familiar with the securities market information securities company executives, lawyers, accountants, etc. should be able to serve as the chairman of the Securities and Futures Commission as a suitable candidate, but due to the level of the securities company is too low, had to be selected from the level of the Bank of China's vice-presidents and enjoy the vice-ministerial level of the president of the Bank of the big banks. Even so, are promoted a level, if the direct promotion up to the level of the Department of the brokerage firm executives, it is a jump in promotion of two levels. In the current officialdom of China, it seems impossible.

Newsweek Asia: Due to time constraints, that's all we'll talk about today. Thank you for your insights!

Xu Shimin: No, it is only my shallow introduction, I hope to be corrected!