Finance
China regulatory chief’s appointment indicates tightening, reforms on cards
The Chinese securities watchdog’s new head, “Broker butcher” Wu Qing, has lost no time in tackling the turmoil that has rocked the country’s stock markets, after it hit five-year lows this month, unveiling a slew of proposals aimed at reviving market confidence.
The China Securities Regulatory Commission (CSRC) said late on Monday that its newly-appointed chairman Wu Qing led a host of meetings immediately after the Lunar New Year holiday to discuss topics around regulating and preventing risks in the country’s capital markets, as well as promoting their “high-quality growth”.
Wu Qing, a veteran official with experiences across regulators and exchanges, earned his moniker after he cracked down on brokers for regulation breaches during his time as director of risk management office at CSRC in 2005-2009.
He then handled asset management companies’ illegal trading cases as director of the fund department. His background contrasts with that of previous CSRC chairmen who were mostly SOE banking veterans.
The post-holiday meeting was attended by a wide range of participants including academics, officials from listed companies, privately-owned companies that are preparing to go public, brokerage firms, private equity firms, financial and legal advisory firms and foreign-owned companies.
The meeting proposed tightening the vetting process for IPOs, greater regulatory scrutiny of listed companies, and stricter weeding out of unqualified candidates. This will help to “fundamentally improve” the quality of public companies and generate better investment returns, a post-meeting statement said. The healthy development of China’s capital markets is of crucial importance to investors, it said, reflecting the issue of investor confidence.
China IPO volume dives after regulator engineers offering drought to boost markets
China IPO volume dives after regulator engineers offering drought to boost markets
The watchdog also vowed to standardise transactions in various asset classes, in a bid to improve the fairness of the trading system. It also proposed to develop the country’s investment institutions and inject more medium and long-term capital into the stock markets.
“The capital market has wide implications, and the more complex and severe the situation is, the more open we should heed advice and pool wisdom,” the CSRC said in the statement.
“The CSRC will treat all feedback, suggestions and criticism with seriousness, and make sure to execute anything that has proven to be feasible. For those that cannot be executed right away, we will make sure to communicate and respond to the market concerns in time. We will join forces to foster the healthy development of the capital markets.”
Wu, a banking and regulatory veteran with a PhD in economics, was appointed the chairman and party chief of the CSRC on February 7, replacing Yi Huiman after he failed to end a rout in the country’s US$8 trillion stock market. The carnage saw around US$5 trillion in market value being wiped off from its peak in 2021, with piecemeal support measures providing little relief.
Before his elevation as CSRC head, Wu ran the Shanghai Stock Exchange and served as the deputy party chief of the financial centre of Shanghai. His earlier stint at CSRC saw him take charge of fund and institutional supervision, as well as risk disposal for securities companies.
“Wu is likely to continue to enhance regulatory tightening in capital markets and the securities industry, considering his experience as well as the key tone of the Central Financial Conference in November 2023,” said Jefferies analysts in a note.
Wu has already indicated he means business. Two days after his appointment, the CSRC imposed a 4 million yuan (US$555,748) fine on S2C Ltd, a Shanghai-based semiconductor company, for inflating its earnings in its listing application. On the same day, the securities watchdog also fined employees at China Merchant Securities a total of 81.2 million yuan for illegal stock trading.
“We think this new appointment suggests China intends to strengthen supervision and crackdown on illegal activities in the capital markets,” said Everbright Securities in a note. “This aligns with CSRC’s 2024 work conference, which prioritised investor-oriented principles and risk prevention. Moreover, we expect Wu to be tasked with further financial reforms and opening up in Shanghai as well as financial support for sci-tech innovation, where the Star Market will continue to be the place for pilot measures.”
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“The release of the Hong Kong Taxonomy for Sustainable Finance marks a key milestone for Hong Kong’s sustainable finance landscape,” Eddie Yue Wai-man, CEO of HKMA, said in a statement on Friday.
“By providing a common language and framework for sustainable finance, we are equipping market participants with an important tool to make informed decisions, drive impactful cross-border investments and contribute to global efforts in combating climate change.”
The taxonomy covers 12 economic activities under four sectors: energy, transport, construction, and water and waste management.
Having a taxonomy is important to prevent “greenwashing”, the act of making unsubstantiated claims about the environmental benefits of a product or practice.
The HKMA plans to expand the taxonomy soon to cover other sectors like retail and services, said Arthur Yuen Kwok-hang, deputy CEO of HKMA, who added that the authority had received positive feedback following market consultations last May on preparing the taxonomy.
“We encourage the financial sector to use the taxonomy to assess the greenness of projects when they decide to make green loans to these companies,” Yuen said at a media briefing on Friday.
“A green taxonomy is an integral part of the green finance ecosystem. It enables investors to look for green investment opportunities and make informed decisions, thus easing the mainstreaming of sustainable finance flows.”
The taxonomy has adopted local elements such as listing out Hong Kong certifications and standards that could be used to prove the buildings or operations are environmentally friendly and also are in line with guidelines issued by mainland China and the EU.
“This will help companies operating in mainland China and Europe to consider borrowing green loans or raising green bonds in Hong Kong,” Yuen said, noting that Asia alone will require US$66 trillion in climate investments over the next 30 years.
“Addressing climate change requires the support of the financial industry, which in turn will bring about enormous opportunities,” he said. “Hong Kong, which is an international financial centre, is the ideal capital market to support these green financing activities.”
Investments on such a massive scale are needed to meet the global aim of containing global warming within 1.5 degrees Celsius of pre-industrial levels and avoid the worst effects of extreme climate events. Last year was the warmest year on record, according to the World Meteorological Organization.
“Extreme weather is clear evidence of accelerating climate change and a reminder for an urgent need for decarbonisation,” Yuen said.
02:01
What is climate finance, and why is it crucial to the global energy transition?
What is climate finance, and why is it crucial to the global energy transition?
The Hong Kong government’s decision to extend the US$100 billion Green and Sustainable Finance Grant Scheme for another three years will cover transition bonds and loans for companies to upgrade their equipment to save energy and cut down on pollution.
The move was announced by Financial Secretary Paul Chan Mo-po in his budget speech in February. The current scheme expires on May 10.
“The scheme will encourage more companies and industries in the region to make use of Hong Kong’s financing platform as they move towards decarbonisation,” Yuen said.
Separately, the HKMA will soon launch a cloud-based platform for banks to assess the potential impact of physical risks on residential and commercial buildings in Hong Kong under different climate scenarios, such as flooding and typhoons.
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