China Is Said to Prioritize Capital Market Reform in Coming Year

(Bloomberg) -- Chinese regulators will focus on improving the legal framework of capital markets and reducing state intervention next year, according to an official with knowledge of the discussions.

Authorities came to a consensus on these key aims for China’s financial markets during the annual Central Economic Work Conference, according to the person, who asked not to be named as the decision isn’t public. The leading role of the Financial Stability and Development Committee will also be emphasized, the person added.

Any concrete steps China takes to create a better legal framework and reduce government intervention would make markets more appealing for foreign investors. That’s especially the case with Chinese stocks already in global indexes such as those managed by MSCI Inc. and the expected addition of domestic bonds to such indexes.

Separately, the central bank issued a statement on Thursday on a meeting held by the FSDC, financial institutions and regulators. Though the statement didn’t explicitly say what policy makers would focus on in coming years, the fact that it happened during the three day agenda-setting conference signals the urgency with which regulators regard capital market reforms.

"Central authorities have made clear that China must build a market-oriented, rules-based capital market, and that financial departments must speed up their work," according to the statement. "Reform will focus on improving the quality of listed firms, strengthening their governance and making the delisting process more strict."

The government will look to "reduce administrative intervention in trading," the statement said. News of the meeting was on the front page of major Chinese financial dailies on Friday.

In Chinese Media: Government Pledges to Cut Market Intervention (Click to Subscribe)

China’s stock market is among the world’s worst performers this year, having lost more than $2.3 trillion in value since the beginning of the year.

The PBOC statement also publicized for the first time that PBOC Deputy Governor Liu Guoqiang will be a deputy director of the office of the FSDC. The organization is headed by Vice Premier Liu He, with People’s Bank of China Governor Yi Gang and State Council Executive Deputy Secretary General Ding Xuedong as deputy directors.

China’s leaders were set to conclude the three-day annual economic policy-setting meeting on Dec. 21, people briefed on the plans said earlier this month.

In March, Bloomberg L.P., the parent of Bloomberg News, announced that it planned to add Chinese bonds to the Bloomberg Barclays Global Aggregate Index, starting in April 2019.

--With assistance from April Ma.

To contact Bloomberg News staff for this story: Haze Fan in Beijing at hfan40@bloomberg.net;Lucille Liu in Beijing at xliu621@bloomberg.net

To contact the editors responsible for this story: Sam Mamudi at smamudi@bloomberg.net, James Mayger, Fion Li

©2018 Bloomberg L.P.

With assistance from Bloomberg