Illustration: Chen Xia/GT

The China Securities Regulatory Commission (CSRC), in conjunction with other relevant financial authorities, is now actively studying problems associated with reforms to China's IPO system, said Deng Ge, a spokesman for the commission, at a regularly scheduled press conference held Friday.

These statements came in response to recent speculations that regulatory attitudes were "softening" on earlier plans to launch a registration-based framework intended to replace the country's approval-based IPO protocol. As the 21st Century Business Herald revealed last week, citing insiders close to the matter, senior CSRC authorities described the establishment of the registration mechanism as a still-unaccomplished goal in a meeting held shortly before the Spring Festival. Several other objectives, officials reportedly explained, need to be achieved in order to complete the transition.

Oddly, these seemingly innocuous remarks led many in the public to conclude that securities regulators may call off highly anticipated reform pursuits due to unfavorable market conditions. Some market insiders also chimed in with assertions that the CSRC's much-ballyhooed mechanism wouldn't be ready for at least another two years.

If nothing else, these rumors illustrate the skepticism which still clouds efforts to introduce a market-oriented listing system. Since the release of reform blueprints following the Third Plenary Session of the 18th Communist Party of China Central Committee which specifically mentioned the development of a registration-based IPO system, CSRC officials have stated on multiple occasions that they will accelerate the establishment of the new mechanism. Currently, most analysts believe the new protocol will become fully operational in 2015.

In statements aimed at pacifying delay concerns, Deng made it clear that the transition will take time and require such preconditions as the revision of Chinese securities laws. According to Deng, during the transitional period, the CSRC will fully implement its reform guidelines on new listings while also improving the efficiency and transparency of the entire IPO examination and approval process.

The spokesman's comments echo the spirit of a speech delivered by Xiao Gang, chairman of the securities regulator, at the Caijing Annual Conference in November. According to Xiao, the implementation of a registration-based share offering system will create many challenges and thus requires a series of supportive rules and regulations.

To be sure, the drive toward the new system is irreversible and inevitable as authorities work to give the market more say in the allocation of resources. Speculations and rumors like those mentioned above are, of course, unwarranted based on the signals we've seen thus far from authorities. Still though, the lack of public confidence behind this impending shake-up underscores the difficulties and challenges facing regulators.

To maintain credibility and avoid market misunderstandings, at this current stage China's securities regulator should set a specific timetable for the launch of its new scheme. Such a move would indeed speak louder than the "we're working on it" statements we've seen to date. In the meantime, delisting rules should be strengthened so that the market will have an efficient exit mechanism.

In addition, while the registration system is expected to remain a work-in-progress throughout the rest of this year, the CSRC will likely resume IPO reviews next month. At Friday's press conference, the spokesman explained that no changes have been made to its scheduled resumption of new listing review meetings. And according to a statement on the commission's official website, companies which have been reviewed but didn't list will have to make a supplementary report of their 2013 financial results before getting final listing approval. Meanwhile, those currently lined up in the IPO pipeline should include their annual reports for 2013 in their listing review documentation.

Although the CSRC released rules to curb high issuing prices after reopening the IPO floodgates, trading of new shares in the secondary market has been extremely heavy. Almost all of the 50 or so new shares that debuted in January and February soared by the 44 percent upper limit during their first day of trading. These gains came at the expense of blue chips, which fell under sell-off pressure as capital flowed into new listings.

Given the reform path taken by the CSRC, it is quite reasonable for the regulator to allow companies that were reviewed in late 2012 to go public, a move to clear the backlog which built up under the commission's approval-based system. Yet, the resumption of review meetings for some 700 IPO applicants raises red flags in a market that's currently in the midst of a major transition.

Fundamentally speaking, a flood of IPOs will do nothing but drain capital, further weighing down the A-share market. Given the obstacles related to IPO resumption this year, the CSRC should complete its planned registration system before restarting review meetings for newcomers. The CSRC suspended new offerings for more than a year in a bid to boost investor confidence and curb speculative trading of new shares. Without big changes to the system as a whole, the review resumption would just make the yearlong moratorium meaningless.

The author is a reporter with the Global Times. bizopinion@globaltimes.com.cn