China plans to boost start-ups, bond trading

BEIJING - CHINA may set up a second exchange for trading the stocks of start-up companies and expand corporate bond trading this year.

The move is aimed at providing more investment options to help investors manage risks, said the securities regulator.

'China needs more financial instruments to help investors cut risks,' said Mr Shang Fulin, chairman of the China Securities Regulatory Commission. He was speaking at the annual meeting of China's top legislature, the National People's Congress (NPC), yesterday in Beijing.

Mr Shang, regulator of Asia's third-largest stock market, is trying to force China's listed companies to be more transparent in the US$1.15 trillion (S$1.76 trillion) equities market.

Underscoring the challenge which he faces, China's key stock index plunged 9.2 per cent on Feb 27, sparking off a global sell-off in stock markets from Tokyo to New York.

The Chinese government must protect retail investors and prevent the market plunge from leading to bad loans, said the vice-chairman of the NPC's standing committee, Mr Cheng Siwei, in a Feb 6 interview in the Chinese-language Financial News.

Echoing Mr Shang's comments, the chairman of the Shanghai Futures Exchange, Mr Zhu Yuchen, also called for the introduction of more financial products including futures, options and yuan derivatives.

About 120 start-up companies already trade their stocks on a growth-enterprise exchange in Shenzhen.

A second such exchange in Shanghai would enable more companies that lack a profit track record to raise funds in a country that has 33 trillion yuan (S$6.5 trillion) in national savings.

'The experience with growth-enterprise markets around the region has been that they were fraught with challenges, so we have to put in all the risk management features to ensure that the exchange can enjoy a healthy start,' Mr Shang said.

The Chinese government also plans to allow more companies to sell corporate bonds and broaden the scope of trading in the market, he added without giving further details.

BLOOMBERG NEWS