The Inherent Defects Of China'S Stock Market System Are Very Significant.

It is reported that the national financial work conference which has been delayed and five years has been held since today (14). The meeting has set the tone for the direction of financial work and Reform in the next few years. The media has estimated the coordination of financial regulation, financial security, risk prevention and control, and financial openness.

It can be said that the national central financial work conference, of course, is aimed at redeploying the major problems facing China's financial market and setting the tone for financial work and financial reform in the next few years.

But what are the core issues of China's financial reform? Is it just to strengthen financial regulation by restructuring and setting up the organizational structure? Where is the bottom line of China's systemic risk? How can it be prevented and controlled? How can China's financial liberalization go well?

Taking China's stock market as an example, the key to the reform of government stock market in recent years is that the problems of high financing cost and heavy debt burden, weak innovation ability, low efficiency of financial market and high risk are related to the irrational financing structure of China's financial market and the serious lag of direct financing development. Therefore, according to the deployment of China's financial reform in the third Plenary Session of the 18th CPC Central Committee, the government hopes to quickly build a multi-level capital market with a high degree of marketization, especially to accelerate the development of China's stock market, so as to adjust the structure of China's financial market and increase the financing channels of enterprises.

In this way, the real estate market risks accumulated over the past decade, the debt risk of enterprises and local governments, and financial market risks can be solved, and China's economy can also enter a new period of rapid growth.

Whether China's stock market has surged or plummeted in 2015 or the great leap forward of the stock market IPO since 2016, basically the corresponding policies are launched under this train of thought.

But the Chinese government has never considered that the credit of the Chinese stock market is fundamentally different from that of the developed European and American markets.

Under such circumstances, the credit of the newly developed stock market in China can only be covert by the government.

Since the credit of the stock market is completely established by the government and implicit guarantee, the government is of course the leader of the stock market.

Under such circumstances, China's stock market has become an out and out policy market.

The government can not only make use of hand examination and approval power and pricing power to dominate stock market resource allocation, but also control the scale and price of the stock market and control the rise or fall of the stock index.

Since China's stock market is entirely dominated by a government led policy, Chinese investors do not need to look at the macro economic situation or the performance of listed companies.

In this case, the analysis of the cost and income of the Chinese stock market investors will buy their own investment behavior and pfer the cost of their investment behavior to the whole society.

Because their investment behavior is completely guaranteed by the government.

Investors in the stock market will prefer highly risky investments, because the higher the risk of investment, the greater the possible return, but it may pfer the excessive behavior cost to the government or the whole society.

Under such circumstances, the entire stock market must be a speculative market.

The sharp rise and fall of China's stock market is inevitable.

And because the government is worried.

Those who are too risky and too hyped are required to set up various restrictions on the operation of the stock market, such as setting up a price limit system, setting up guidelines for overseas investors to enter, and guiding the stock market investors to invest or not invest in certain stocks.

Because of the implicit guarantee of the stock market credit and the strict control of the stock market, the government will not only seriously distort the supply and demand relationship and price mechanism of the stock market, but also create a weak sense of risk and a serious violation of the mentality of the stock market investors.

That is to say, the market disorder in the stock market is seriously related to the excessive regulation of the stock market and the excessive participation of the government in the market.

It is precisely because of the government's excessive participation and interference in China's stock market that the inherent defects of China's stock market system are very significant.

For example, state owned enterprises of listed companies are dominant; speculative speculation prevails; market price mechanism is distorted; absolute power can not be effectively restrained; financial systems, financial products and financial instruments of European and American countries are simply introduced.

Therefore, for China's stock market reform, we must start from the foundation of the credit system, such as adjusting the strategic development of China's stock market, restricting the absolute power of China's stock market and making the state-owned listed companies truly become public companies.

At the same time, when the stock market is dominated by absolute power, it will not only lose the price mechanism of the whole market, distort the price of the stock market, but also decide the allocation of resources through market factors, and at the same time, the interests of small investors may be infringed at any time.

First of all, to make China's stock market mature, we must let market factors play a decisive role in the stock market, rather than distort the supply and demand of the stock market artificially.

Over the past year, China's stock market has made the IPO issue fast. It will distort the market supply and demand and enlarge the absolute power of the government to intervene in the market. If we do not put these absolute powers in the cage of the system, it is not easy for the Chinese stock market to think well.

If the relationship between supply and demand in China's stock market can not be determined by the market, and the effective stock market price can not be formed, then investors or listed companies will be at a loss.

That is, investors can not price the stock of listed companies by market factors, nor can the listed companies decide the supply and demand of stocks.

Therefore, the current artificial way to increase the issuance of IPO is not desirable.

Similarly, reducing government power to participate in the stock market is also an important aspect of the marketization of supply and demand in the stock market.

This also means that it is imperative to reform the stock market issuing system to register system.

Second, we must deal with the current situation.

To conduct a comprehensive review of the rules and systems, and to restructure the power structure of China's stock market.

Because stock is the pricing of credit risk for listed companies.

For the stock market with implicit government guarantee, it is not only easy for the government to overly dominate the stock market resources, but it may not be able to effectively restrain this absolute power.

Therefore, in order for the Chinese stock market to be truly self repairing and reborn, it is necessary to reconstruct the power structure of China's stock market and effectively restrict such absolute power, so that the credit of the stock market can be changed from the implicit guarantee of the government to the evolution of the market.

Third, we must re understand and understand the functions and functions of financial innovation and financial derivatives.

Because in the past, regulators had lobbied in all kinds of forces, and always thought that developing financial markets and capital markets in China had to introduce corresponding financial derivatives, otherwise China's financial market would not be easy to improve.

But in fact, the negative effects of these financial derivatives in developed European and American markets far outweigh the positive effects. These financial derivatives often become the root causes of four unfair competition and financial crisis in the financial market, so the developed countries are also adopting different legal systems to supervise these financial derivatives.

Therefore, the regulatory authorities should conduct a comprehensive review of the financial derivatives and stylized pactions introduced in recent years to see if these tools are suitable for China.

Fourth, the pformation of regulatory philosophy.

The pformation is to change from the past supervision of China's stock market to the guidance and regulation of ex ante supervision.

It can be said that an important lesson of the sharp rise and fall of China's stock market in 2015 was that regulators did not understand the emerging Internet financial HOMS system, so that they could not formulate rules for pre regulation and risk prevention, thus allowing the off street financing market to grow wildly and brutally.

Until this market has become wild and barbaric, it will be inevitable to take a simple and crude way to stop and curb the volatility of China's stock market.

Finally, the public decision-making of the institutional arrangement of China's stock market is the key to the maturity of the current Chinese stock market and the institutional basis for the self repair of the stock market.

Because the institutional arrangement and reform of China's stock market can only balance the interests of all parties in this way, so that the laws and regulations can be truly implemented.

That is to say, China's stock market reform does not start with these basic problems, but rather hopes to solve some superficial problems in a technical way, so it is impossible for China's stock market to go well.

China's stock market is like this. So is the reform of China's financial market. A series of important theoretical and practical problems that need to be studied need to be seriously studied and reconsidered. We need to thoroughly reflect on the basic issues before we can find the core of the problem. Otherwise, it is impossible for China's gold market to get out of the mess of chaos.

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