Two women look at a screen for the interbank lending rate in the National Association of Financial Market Institutional Investors in Beijing. File photo: CFP

A meeting by the Financial Stability and Development Committee under the State Council, China's cabinet, decided over the weekend to create a coordination work team to clamp down on capital market irregularities, as part of a broader effort to ensure a sound and stable equity market that has recently soared.

Illegal acts such as fraudulent share issuance and financial fraud are "malicious tumors" of the capital market, to the detriment of investors' legitimate rights. These actions put market order at risk and weigh on the effective functioning of the capital market, according to a statement posted Sunday on the website of the Chinese central government, citing the takeaways from the meeting presided over by Vice Premier Liu He, who heads the financial stability committee. 

Many instances of financial fraud have taken place due to the low penalties for capital market violations and crimes as a consequence of shortcomings in the regulatory framework. The newly revised security law has substantially raised the costs of violations and criminal offenses, the meeting said. 

The China Securities Regulatory Commission (CSRC) and concerned departments will toughen securities law enforcement, resolutely crack down on capital market irregularities, and protect the interests of investors, smaller ones in particular.

The meeting weighed measures to achieve zero tolerance of illegal activities sweeping the capital markets. These measures include deepening delisting reforms to establish a regular exit mechanism and the creation of a coordination work team aimed at fighting stock market irregularities. The team would be set up by the CSRC and related government bodies, as they would jointly maintain a sound and stable market. 

The latest inputs from the financial stability committee came amid a much-watched weeklong rally in Chinese mainland shares that lured a galaxy of new investors born after the 1990s into the market. 

Tougher regulations should be positive, especially for young investors without much background in the equity market, who are eager to capitalize on the bull run amid the pandemic, analysts said.

Global Times