I am very happy to attend this press conference organized by the China Securities Regulatory Commission (CSRC), and I would like to take this opportunity to express my appreciation for your long-standing attention to the capital market and strong support for the Shenzhen Stock Exchange (SZSE). This has been the second time for me to attend the annual sessions of the National People's Congress (NPC). During the NPC and CPPCC sessions, I was actively engaged in an in-depth discussion with nearly three thousand NPC deputies over the work arrangements for further advancing economic and social development this year, and was indeed greatly enlightened and inspired. Now I would like to briefly touch upon the SZSE’s general work plan this year in connection with my understandings derived from attending the NPC and CPPCC sessions.
The NPC and CPPCC sessions this year, with their main theme focusing on reforms, are the first sessions held after the 3rd Plenary Session of the 18th CPC Central Committee. Premier Li's government work report has provided a wealth of information about the capital market.
First, social expectations are stabilized. As stressed in Premier Li's report, this year, we will continue to keep policies stable, ensuring steady growth, ensuring bottom line of employment and ceiling of inflation target. We will focus on economic restructuring and maintain continuity of macroeconomic policies. Meanwhile, the report, following the requirements of a good-faith and rule of law, the government has unequivocally put forward the reform and development tasks for the year. With commitment to every word in the plan, the report ensures rational market expectations for this year's government work.
Second, reform will bring vitality to the market. This is embodied in a set of three principles and the policy directions for fulfilling the target tasks for the year, as well as the nine priorities of the government, most notably in the list of reform activities in key fields.
1. Administration streamlining and power delegation. Among the approximately 1,600 companies listed on the SZSE, most are growth and innovation-oriented enterprises, which are operating on the first line of the market and standing on the frontier of transformation. Over the past year, the Chinese government has been conscientiously practicing various reforms, starting from a change in itself by reforming its administrative approval system. Last year, a total of 416 administrative approval procedures were either axed in batches or otherwise delegated to lower-level governments by the State Council, and this year will see 200 more. Some of the structural and institutional obstacles which have for long been restricting the ability of enterprises to develop were finally cracked, an achievement leading to broader space for their growth.
2. Innovation-driven concept. Premier Li's report proposed that we accelerate reform of the science and technology system and scale up pilot programs for the reform of the rights to dispose of and receive proceeds from science and technology achievements, recognizing innovation as a driving force to optimizing and adjust China's economic structure. We have visited many research institutes and science and technology enterprises, but regretfully found out that a significant volume of scientific research achievements with obvious market prospects had been shelved in laboratories, instead of being offered for the benefit of the entire market in good time. One vital obstacle lies in the difficulty in confirming the share rights associated with the scientific and technological achievements, leading to the fact that the science and technology personnel are not enjoying the corresponding equities as they should, and further damaging their enthusiasm in pursuing innovation in scientific and technological researches. This year will witness amendments to the Law of the People's Republic of China on Promoting the Transformation of Scientific and TechnologicalAchievements, and is therefore a very good opportunity indeed. There was a statement in Premier Li's report about the reform of the rights to dispose of and receive proceeds from scientific and technological achievements. With an intense focus on the most important link in driving economic development through innovation, it will prove to be very conducive for us to establish a pricing and trading mechanism for scientific and technological achievements by relying on the capital market, and to build up the ability of the listed companies in pursuing scientific and technological innovation and in transforming the scientific and technological achievements into a source of performance growth to bring higher returns to their investors.
3 Reform of state-owned assets. There are 1,300 state-owned holding listed companies in China, which together account for a weight as high as 81% in the Shanghai and Shenzhen 300 Index (CSI 300). Premier Li's report stressed efforts to speed up the development of the mixed-ownership economy, and improve the management system for state-owned assets, which will help activate the state-owned listed companies with significant influence on the capital market. As you may also have noticed, the recent launch of the reform of mixed ownership by Sinopec is filling the market with great expectations for the future development of state-owned listed companies.
During the NPC and CPPCC sessions this year, the topic about the significance and the path of developing a mixed-ownership economy has aroused a heated discussion among representatives from some of the state-owned enterprises. The majority of them hold the belief that the capital market serves as an important platform for mixed ownership. First, it is open and transparent to avoid black-box operations; second, it provides a fair pricing to prevent tunneling; third, it facilitates cross-industry, cross-region, cross-ownership restructuring activities and mergers & acquisitions of assets and provides liquidity, which well preserves or increases the asset values; fourth, it offers risk management to ensure the safety of assets; fifth, it fosters the establishment and improvement of a modern enterprise system, and strengthens the micro basis for sustainable economic development, allowing the enterprise to play the principal role in market competition.
Through the transformation from assets management to capital management in the reform of state-owned assets by relying on the capital market, we can help boost the long-term returns on state-owned capitals, and will fundamentally solve the problem of low returns on the capital market. At present, a lot of state-owned assets holding companies are operating more often on their current profit targets. I once came in contact with a municipal state-owned assets management department. Because a profit decline suffered by the state-owned assets companies in some sectors affected the asset profit targets for the year of the city as a whole, the Department required those state-owned assets companies with better growth to additionally increase their current profits, some of whom even went as far as selling a number of very promising assets in exchange for current profits.
The reform of state-owned assets is a big project, needing joint efforts and high attentions from every one of us. Former CAPCO Chairman Chen Qingtai has recently published in Caijing Magazine an article titled Roadmap for Reform of State-owned Assets, in which he had provided a comparatively systemic and thorough analysis of this issue. You may find it a very useful source for consultation.
When it comes to what SZSE will be doing specifically this year, I think, we should adapt to the reform situations and task requirements, andfocus on advancing regulatory restructuring and improving our service quality. In respect of the regulatory restructuring, we should streamline the ex-ante approval procedures, and reinforce both interim supervision and ex post supervision. As an organizer of the market and self-regulatory organization, the exchange is the hub of market operation, and will take a more prominent role in exercising interim supervision. We will offer active cooperation for this transition in the following three aspects:
The first is to improve the investor-oriented information disclosure mechanism, and enhance market transparency. We will work hard on achieving real-time, targeted and effective information disclosure, leaving the enterprise, as the principal player in the market to play the survival game under a full-information condition and by the self-discipline of the market itself, in order to ensure the efficiency of market allocation.
The second is to enhance risk assessment and monitoring capabilities. The exchange is a natural big database. Over the years, we have been employing various data mining technologies to strengthen market supervision. In recent years, we have been extending our efforts to text mining activities targeting the announcements and network information of listed companies, and in the future, we will further incorporate unstructured data such as videos into our field of vision, bringing the first-line supervision of the exchange into the era of big data in an all-round way. Last year, for example, we intensified intelligent building of corporate governance, allowing the regulators to compare in real time the announcements of the listed companies with their historical information, the network information and the information of other companies within the same industry, and identify anomalies and clues of violations in a timely manner.
The third is to give full play to the role of self-regulatory supervision, and to timely stop violations and impose punishments. By exercising flexible and effective self-regulatory supervision and imposing disciplinary sanctions, the exchange should be able to intervene in violation behaviors in a timely manner and as early as possible, swiftly communicate the information of such violations to the whole market, as an early warning and protection for investors, and submit clues of any violation cases to the CSRC without delay, so that the violations can be detected earlier, and the relevant evidence can be fixed properly. Over the last year, we have made 65 disciplinary sanction decisions, and have for the first time, publicly denounced the sponsor representatives and personnel of the securities service institutions. And we have reported an accumulative total of 133 cases of abnormal fluctuations, up 34% from the previous year.
In the process of comprehensively deepening the reform of the capital market, the quality of the principal market players will become the decisive factor affecting the quality of capital market operation. Over the years, the SZSE has been paying high attention to market incubation services, and this year, we will continue to do a great job in market services by focusing on three aspects:
1 Investor relations management. Over the past few years, we have been continuously engaged in various Company Visit programs. These activities created opportunities for face-to-face dialogues and communications between the management like Chairmen, with investors, especially with small and medium-sized investors and proved to be very fruitful. For example, the Chairmen of some listed companies are very outstanding players in the industries they are engaged in. Some of them are scientists, and some are excellent managers. But when in face of investors, they have been left with no choice but to resort to "draft-reading", even at so close a distance in between. This is an indication that they are not paying too much attention to their communication with the investors.
So what about the investors? Every time we went to the listed companies, we would hold various invitation activities across the country, sometimes through securities companies, because the investors are their clients. The investors were all behaving very proactively. One of them, for example, during our visit to a listed company two years ago, even drove for 200 kilometers to join us and insisted that he would like to meet the Chairman of a listed company he had been investing in for many years. After meeting with the Chairman, he said, "I actually have for many years wanted to see the company and meet its Chairman personally and finally I had the chance. I asked him lots of targeted questions."
These activities also left a huge impact on the Chairmen and senior executives of the listed companies. For example, two years ago, when we went to a large listed company, the investors were indeed very tough, questioning that since the companies had heaped up huge amounts of cash, why they couldn't buy back their shares of the respective companies according to international practice to spur the sluggish stock. Such a face-to-face challenge did give the Chairman a shock. This scenario may have been presented in relevant trainings before, but it will surely have a far more strong effect on the Chairmen when they are confronted with the questioning from their own shareholders.
You may be familiar with a service called "Easy Voting" that the SZSE provides. We have nearly 1,600 companies listed on the SZSE which are operating all over the country, and numerous investors, which are also distributed all over the country, mainly small and medium-sized investors. Then how can we make it more convenient for the investors to participate in the general meetings of shareholders? And how can we enable them to vote more easily and at low cost? Here "Easy Voting" is playing a major role. We have found out that some companies chose to hold their general meetings of shareholders in relatively remote places, and at times when investors were not available, so we required that they adopt a form of Internet voting in these meetings, for the convenience of the investors. As such, Easy Voting has played a very important role.
2 Buyer incubation. Buyers' quality determines the quality of the market. Last year, we developed the first domestic online investor education game platform called "Easy Investor Education". On the basis of the more than 20 years' real historical market transaction data of the SZSE, the platform brings together multiple investor education games like "Investment Simulation", "Psychological Test", "How Much Do You Know About Stock Market", etc. With the Easy Investor Education, investors can really build up a philosophy of rational investment, by simulating different investment strategies for the stocks they have invested in, and repeatedly comparing with previous operation. This year, we will promote the Easy Investor Education to over 6,000 business departments across the country.
3 Information quality. Information quality directly determines the investment quality of buyers. With the advent of the era of Internet and big data,we have seen a significant reduction in the costs of information collection, processing, analysis and transmission, and we will give play to the role of public platforms, making up for the weakness of the investors in such aspects as information collection and analysis. This year, we will upgrade the "XBRL Demonstration Project" website to a platform called "Easy Analysis", and integrate the XBRL, Internet information technology and visualization technology to provide investors with chart data, multidimensional exhibition, information analysis and other services, and help them understand the financial and operating performance of listed companies in an intuitive and easily accessible manner.
Launched this year, the phone APP version of the Easy IR platform was greatly welcomed by everyone. We have been placing great emphasis on the disclosure of research information of institutional investors by the Easy IR, and have released 14,000 pieces of research information since its availability in July 2012. Questions for institutional researches, which are of high quality, great depth and strong professionalism, have proved to be a good help to small and medium-sized investors, when shared with investors through the Easy IR. By the way, I need to note the fact that the market pricing power depends on whether there is a group of price discovers and leaders. We have made a great effort to build a public platform like this in order to leverage the professional advantages of institutional investors, enhance the information quality of the market as a whole, and motivate issuers to continuously improve the quality of information disclosure.
Through these activities, we felt it a must to connect with the investors to develop benign interactions. The more services you provide to the investors, the better you can understand their needs. Through the analysis of the interaction between listed companies and investors, we can also shed light on problems facing the listed companies in information disclosure and investor relations, and be oriented to investors' needs in information disclosure regulation.
There is no ending to our services. We must be market-oriented.
Q&As:
Panorama Network: You just mentioned that the EasyIR was now getting better and better, and more and more investors and listed companies were turning to it to communicate and interact. Well, the investors may find that some of the listed companies are not making their points clear, but the listed companies are also in a pretty difficult situation, since the Easy IR is not yet a statutory media of disclosure. I would like to ask you how to deal with the deviation in communication from a regulatory level, while allowing for a bigger role of the Easy IR?
Song Liping: Every day, we will analyze the questions on the Easy IR, and figure out backstage how fast the listed companies are answering them. Since the listed companies answer the questions raised by the investors within a short time, their answers will unavoidably present a varied picture in terms of quality and level of complexity. Here several problems are involved. One is that the listed companies do have the legal obligation of information disclosure, and should all make disclosures in accordance with information disclosure rules. This is mandatory.
Also there is now a part of voluntary disclosure in the EasyIR. This is, I think, a very important part. It reflects the differences between the listed companies. Well, there is still a lot of room for improvement. For example, by comparing the listed companies within the same industry, you will find that the quality of their disclosure is not the same. I think that is where the investors will make choices, because it is fully public. The investors will make comparisons and be drawn more to those which are offering a very high quality of information disclosure. The result is likely to be making investments. This is followed by a constant flow of questions of a higher quality. And the listed companies will continuously perfect themselves according to the questions the investors put to their attention. Many listed companies, especially those showing better growth and better performance, are very concerned about what the investors will ask them, as well as what the investors will ask other listed companies in the same industry, as a way of gearing up their own companies' operations. So I'm sure that these companies will do better and better in the capital market, by continuously attracting high quality investors, who will in turn bring in the advantageous role of the capital market.
Disregard for investors' high-quality questions, in contrast, will lead to differentiation. Companies of low disclosure quality will be separated almost immediately from the group. So, companies like these are actually likely subjects for differentiated review procedures for mergers and acquisitions, as well as the differentiated regulation system. Otherwise, what else could be the basis for us to identify problems?
Moreover, the investors should recognize that in the EasyIR, the disclosure of part of the information is mandatory, whereas the rest is not. This, in my opinion, requires strict distinction.
Shanghai Evening Post: Ms. Song, a question about trading channels. We found that the new shares listed were always bought by a fixed group of hot money institutions. This may seem to be an unfair trade for some investors. There may be possible VIP trading channels, according to media reports. What's your view on this?
Song Liping: From the perspective of the exchange, it is the same as specified by the trading rules. We provide the same trading channels for all of our members.
China Business News: Ms. Song, since the IPO restart, there has been no change in the "frenzied speculation" of newly listed shares, especially on the ChiNext Market which has maintained a relatively high PE ratio. If there is any risk, do you think, in this phenomenon? How could it be improved? Also, Chairman Xiao has noted that a lot of effort will be put in developing the private market this year. We are wondering what measures will be taken in this respect. Thank you.
Song Liping: Your first question is already answered by Chairman Chen the day before yesterday. We are now actively working on mechanisms to settle the suspension of new shares on the first day of their listings.
Your second question is about the ChiNext Market. Indeed, last year has seen a structural price rise in the Board. But because the ChiNext index is only the constituent index of 100 stocks, its rise does not mean that the prices of all the stocks of the over 300 companies listed on the ChiNext Market are rising. And even in the 100 constituent stocks of the ChiNext Board, there is also a structural rise. For example, in the information technology, telecommunications, discretionary consumption and health & medicine industries, the constituent stocks of the ChiNext Market has made a 72% contribution to the rise in the ChiNext Stock Index. The top 20 companies have made a cumulative contribution of 58%.
The third question relates to private placement. Ms Wu Xiaoling mentioned in a press interview yesterday that this was covered by the Securities Law. I think the private placement market is a very important part, and we are also hoping that modifications to the part of private placement can also be included in the amendments to the Securities Law this year, so as to provide legal safeguard for its development.
Specifically, the SZSE will continue to develop SME private placement bonds. So far, nearly 200 enterprises have issued SME private placement bonds, and have raised nearly 20 billion, but this is still some distance away from what we have originally expected. The power of the buyside is still very weak. The market is still accustomed to public placement products. Once private placement comes to play, the customer management ability of our intermediary institutions and the constraints of the buyers are under severe test, because private products require the buyers to be very highly capable of identifying risks.
Exchangeable bonds are also a product we are paying special attention to. Because substantial shareholders are reluctant to reduce their shares in the short term, but they also have to meet their financing demand. Then what's to be done? We can offer such a channel right within the market. We can pledge the stocks first, and then issue exchangeable bonds. The substantial shareholder of a stock on the ChiNext Board has already issued exchangeable bonds. These are all private placement products.
Private placement products are enjoying very broad prospects. On the one hand, institutional improvements should be made, and on the other hand, intermediary institutions should also attach great importance to the development of private placement products.
Chinese Securities Journal: A question about the guidelines for information disclosure by industry. We have made a report about a listed company. It turned out that their prospectus did not conform to the Guidelines for Information Disclosure. According to the SZSE, it was formerly an IPO company but was not listed, and instead of being bound by the Guidelines for Information Disclosure by Industry, it may make disclosure by means of prospectus, before it was listed. So the SZSE could not make a judgment on this. I would like to ask when the guidelines for information disclosure by industry of the SZSE will cover a category of listed companies like these.
Song Liping: This involves the seamless connection between issuing and listing. Particularly, in the environment of our current market, the issuance cycle is very long. Sometimes after issuing is completed, there is still a period of time to wait before listing. So how can we realize connection between issuing and listing? This is a very important matter, and we have already begun working on it. The question you raised is just one part of it, and there are some other post-meeting issues. Over the past two years, we have gradually taken several measures to achieve seamless connection.
21st Century Business Herald: Big data played a great role in the various case clues of the exchange last year. Could you say more about how we were doing last year, in terms of big data application and law enforcement, and what we can do to improve for the future?
Song Liping: Intelligent market regulation has been one of our key priorities, and we have a special team dedicated to this. Because the original information was widely scattered, we had to put it all together. We have had a hard time assimilating the data mining and text mining technologies, as these technologies did present some difficulties to us, realistically speaking. Then we had set up a special team to study the American Sonar system, that is, to collect all aspects of information. But as you know, there are some differences in Chinese and English text information. And we faced this kind of problem during the implementation process. This is one of the bottlenecks we have encountered for now.
Well, you may also have known something about our real-time monitoring of share prices. In fact, this type of monitoring has already covered the information monitoring of listed companies. This was the biggest change we made last year. It has also found application in other areas. For example, for an increasing number of underlying securities in securities margin trading, we were applying big data in their risk assessment and monitoring, and furthermore, it was also used in the products involving stock right pledge. It is now moving gradually towards full coverage.
China Securities Journal: How will the reform of ChiNext Refinancing be like this year? Will there be any new products?
Song Liping: Last year, the State Council has approved preferred stocks. The CSRC has prepared a public opinion soliciting draft of administrative measures for pilot projects of preferred stocks. The listed companies will add a new class of preferred stocks in the former refinancing categories.
China Daily: What are the highlights of refinancing rules for the ChiNext Board? For example, who will set the amount? How will the industry be adjusted? In addition, as international investors are very much interested in the ChiNext Maekwr, thinking that it is the representative of China's new economy, I would like to ask what measures the SZSE will take in this respect, as far as the foreign investors are concerned.
Song Liping: ChiNext Market refinancing rules were organized and finally promulgated by the CSRC. It is not our administrative measures for refinancing, and we are only participants. I think we all will see the final version soon, which will prove to be better. We are hoping that we can adapt to the characteristics of the companies listed on the ChiNext Market, and implement the small-amount fast refinancing mechanism we have been promoting for years.
Your second question relates to foreign investors. You may also have noticed that, beginning from the year before last, we have been working specifically on foreign investor relations management, such as by inviting QFII investors to visit some of the listed companies in China. You also mentioned that they were very much interested in China's domestic listed companies, especially those enterprises with good growth potential. We have special English websites, which serve as a window for servicing foreign investors, and Market Bulletin, which provide them timely access to the information of the domestic listed companies of interest to them. This year, we are going to go deeper and wider in this respect, to meet the needs of institutional investors, and continue to organize visits for them to the listed companies they have interest in.
China Economic Weekly: Ms. Song, just now, you brought up the amendments to the Securities Law. That is something every one of us is looking forward to. And I would like to know what your thoughts are about this in terms of its idea and direction. Thank you.
Song Liping: I hope that several aspects can be covered in the amendments to the Securities Law this time. Like private placement that I just mentioned. The original Securities Law has made very clear provisions for public placement, but not for private placement. And regional market, which is a relatively blank area in law. But it is also very important, especially for small and medium-sized enterprises, and is playing an ever increasing role in supporting regional economic development. And it will be just in time to have it modified during the amendments to the Securities Law this year.
AAStocks: I would like to have your views on the strategic emerging industries board, as well as the framework of cooperation between the SZSE and HKEx. Thank you.
Song Liping: I have noticed that Chairman Gui also raised a proposal this time. It shows that the emerging industries have been drawing attention from many more areas and market forces. This is indeed very advantageous to their development. This year marks the fifth year of the ChiNext Market. Well, during its development course of nearly five years, it has attracted a batch of emerging industries like the Internet, new energy, environmental protection, health and culture to go public, and has proven to be fruitful to a certain extent. But the ChiNext Board is still a long way away from what it was primarily designed for and what the market is expecting of it, both in terms of its current development and its staged achievements. Just now, you have mentioned the IPO refinancing system of the ChiNext Board. This system is also in a process of constant improvements.
Well, after the launch of the ChiNext Market, we all are still seeing companies like Dangdang, Alibaba, choose to be listed on overseas markets. Previously, such as in the 1990s, all of the three major portals in our country went overseas to be listed, because we hadn't the ChiNext Board at that time. But now, after the ChiNext Board was made available, why is that these enterprises are still getting listed overseas? This is something really worth reflecting on.
In addition, the ChiNext Market isn't large in scale. Totally 379 companies were listed on it, with a combined market value of 1.7 trillion. Tencent was listed in Hong Kong. It is a Shenzhen-based company, with a market value worth nearly one trillion. The market value of Tencent alone exceeds more than half of the total market value of the 379 companies, so it can be said that the ChiNext Board is indeed of a relatively small scale. Small scale would easily lead to instability. On the other hand, as a matter of fact, we launched the ChiNext Board after careful analyses of over 40 Second Board Markets across the world. The Nasdaq is the most successful of them, and our ChiNext Board is developed based on it.
But whether it is in terms of scale or system, I think, currently, we are in a very critical period of growth and development. The Central Committee of CPC has, in particular, put forward the strategy of deploying the innovation chain around the central industry chain, and perfecting the capital chain around the innovation chain. The ChiNext Market plays a very important role in integrating the industrial chain, the innovation chain and the capital chain. We are keenly aware of the enormous responsibility on our shoulders, and are acting most cautiously as if treading on thin ice. To be frank, in its critical period of development, we are recommending that we go all out to build the ChiNext Board into a better market, and live up to our mission.
When it comes to the cooperation between Shenzhen and Hong Kong, on the one hand, our information is interchangeable, and there is a natural advantage for cooperation between the two sides. Two years ago, we have contributed to set up the China Index Services Company, together with HKEx, and of course, the SSE. This is the product of joint efforts in developing the Greater China Region.
There is one more thing, the B- to H- share conversion, as you may have taken an interest in. Two companies have already successfully converted their B shares into H shares, CIMC and Livzon. Vanke's recent program for B- to H- share conversion was also approved by the CSRC. This not only served as a very beneficial exploration effort into the financial cooperation between Shenzhen and Hong Kong, but also helped build up experiences.
China Business Network TV: Two questions about the board transfer mechanism. What is the main idea in its design? And how is it faring currently?
Song Liping: The board transfer mechanism is indeed very important. First, there should be clear and fair positioning for each board. For example, I just mentioned that the ChiNext Market only had over 300 companies listed on it after nearly five years. The SME Board has been up and running for ten years. But only 719 companies have been listed on it and their combined market value is just around 4 trillion. So first of all, we have to build a solid market base for each board. This, I think, is our top priority.
It is the same with the New Third Board. After it was expanded across the country last year, it has begun to show signs of very promising development. Well, even in this process of development, it is essentially at the very beginning, and still requires a lot of effort to be taken in aspects of system design, enterprise listing, promotions and many more.
It is on this basis, and according to the needs of market development, and system arrangements that we should implement the board transfer mechanism. Here is involved the "way of introduction". And the support of legal system is also required.
Caixin Magazine: As mentioned by Chairman Gui Minjie, the strategic emerging industries board may overlap with the ChiNext Market to a certain extent, and competition will still exist between the two, though they are in different orientations. He said that competition was a good thing, but was not sure about what the SZSE would be doing to get prepared for this?
Song Liping: First of all, we will do our best to build and improve the ChiNext Market. This is something I already explained to you just now. It is very important for the development of China's economy as a whole to maintain healthy competition with the SSE and galvanize mutual development. Though China is the world's second largest economy, development level and scale of its capital market lags far behind. The current economic structure in our country is characterized by diversity. There are the development of emerging industries and transformation of traditional industries. The reform of state-owned enterprises, fostering of private economy and development of mixed ownership go side by side. So the ChiNext market has been charged with a lot of heavy tasks. But this also presents us with great opportunities.
The two exchanges are the direct product of reform and opening-up. Over the past 20 years, it is reform that has been driving the development of the exchanges. Therefore, amidst a new round of efforts in comprehensively deepening the reform, our two exchanges will see huge space for development. To my point of view, the two exchanges may play a better and bigger role in the nation’s economic development as a whole, if they strive for differentiated development while leveraging their own unique advantages.
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Shanghai Evening Post: Ms. Song, a question about trading channels. We found that the new shares listed were always bought by a fixed group of hot money institutions. This may seem to be an unfair trade for some investors. There may be possible VIP trading channels, according to media reports. What's your view on this?
Song Liping: From the perspective of the exchange, it is the same as specified by the trading rules. We provide the same trading channels for all of our members.
China Business News: Ms. Song, since the IPO restart, there has been no change in the "frenzied speculation" of newly listed shares, especially on the ChiNext Market which has maintained a relatively high PE ratio. If there is any risk, do you think, in this phenomenon? How could it be improved? Also, Chairman Xiao has noted that a lot of effort will be put in developing the private market this year. We are wondering what measures will be taken in this respect. Thank you.
Song Liping: Your first question is already answered by Chairman Chen the day before yesterday. We are now actively working on mechanisms to settle the suspension of new shares on the first day of their listings.
Your second question is about the ChiNext Market. Indeed, last year has seen a structural price rise in the Board. But because the ChiNext index is only the constituent index of 100 stocks, its rise does not mean that the prices of all the stocks of the over 300 companies listed on the ChiNext Market are rising. And even in the 100 constituent stocks of the ChiNext Board, there is also a structural rise. For example, in the information technology, telecommunications, discretionary consumption and health & medicine industries, the constituent stocks of the ChiNext Market has made a 72% contribution to the rise in the ChiNext Stock Index. The top 20 companies have made a cumulative contribution of 58%.
The third question relates to private placement. Ms Wu Xiaoling mentioned in a press interview yesterday that this was covered by the Securities Law. I think the private placement market is a very important part, and we are also hoping that modifications to the part of private placement can also be included in the amendments to the Securities Law this year, so as to provide legal safeguard for its development.
Specifically, the SZSE will continue to develop SME private placement bonds. So far, nearly 200 enterprises have issued SME private placement bonds, and have raised nearly 20 billion, but this is still some distance away from what we have originally expected. The power of the buyside is still very weak. The market is still accustomed to public placement products. Once private placement comes to play, the customer management ability of our intermediary institutions and the constraints of the buyers are under severe test, because private products require the buyers to be very highly capable of identifying risks.
Exchangeable bonds are also a product we are paying special attention to. Because substantial shareholders are reluctant to reduce their shares in the short term, but they also have to meet their financing demand. Then what's to be done? We can offer such a channel right within the market. We can pledge the stocks first, and then issue exchangeable bonds. The substantial shareholder of a stock on the ChiNext Board has already issued exchangeable bonds. These are all private placement products.
Private placement products are enjoying very broad prospects. On the one hand, institutional improvements should be made, and on the other hand, intermediary institutions should also attach great importance to the development of private placement products.
Chinese Securities Journal: A question about the guidelines for information disclosure by industry. We have made a report about a listed company. It turned out that their prospectus did not conform to the Guidelines for Information Disclosure. According to the SZSE, it was formerly an IPO company but was not listed, and instead of being bound by the Guidelines for Information Disclosure by Industry, it may make disclosure by means of prospectus, before it was listed. So the SZSE could not make a judgment on this. I would like to ask when the guidelines for information disclosure by industry of the SZSE will cover a category of listed companies like these.
Song Liping: This involves the seamless connection between issuing and listing. Particularly, in the environment of our current market, the issuance cycle is very long. Sometimes after issuing is completed, there is still a period of time to wait before listing. So how can we realize connection between issuing and listing? This is a very important matter, and we have already begun working on it. The question you raised is just one part of it, and there are some other post-meeting issues. Over the past two years, we have gradually taken several measures to achieve seamless connection.
21st Century Business Herald: Big data played a great role in the various case clues of the exchange last year. Could you say more about how we were doing last year, in terms of big data application and law enforcement, and what we can do to improve for the future?
Song Liping: Intelligent market regulation has been one of our key priorities, and we have a special team dedicated to this. Because the original information was widely scattered, we had to put it all together. We have had a hard time assimilating the data mining and text mining technologies, as these technologies did present some difficulties to us, realistically speaking. Then we had set up a special team to study the American Sonar system, that is, to collect all aspects of information. But as you know, there are some differences in Chinese and English text information. And we faced this kind of problem during the implementation process. This is one of the bottlenecks we have encountered for now.
Well, you may also have known something about our real-time monitoring of share prices. In fact, this type of monitoring has already covered the information monitoring of listed companies. This was the biggest change we made last year. It has also found application in other areas. For example, for an increasing number of underlying securities in securities margin trading, we were applying big data in their risk assessment and monitoring, and furthermore, it was also used in the products involving stock right pledge. It is now moving gradually towards full coverage.
China Securities Journal: How will the reform of ChiNext Refinancing be like this year? Will there be any new products?
Song Liping: Last year, the State Council has approved preferred stocks. The CSRC has prepared a public opinion soliciting draft of administrative measures for pilot projects of preferred stocks. The listed companies will add a new class of preferred stocks in the former refinancing categories.
China Daily: What are the highlights of refinancing rules for the ChiNext Board? For example, who will set the amount? How will the industry be adjusted? In addition, as international investors are very much interested in the ChiNext Maekwr, thinking that it is the representative of China's new economy, I would like to ask what measures the SZSE will take in this respect, as far as the foreign investors are concerned.
Song Liping: ChiNext Market refinancing rules were organized and finally promulgated by the CSRC. It is not our administrative measures for refinancing, and we are only participants. I think we all will see the final version soon, which will prove to be better. We are hoping that we can adapt to the characteristics of the companies listed on the ChiNext Market, and implement the small-amount fast refinancing mechanism we have been promoting for years.
Your second question relates to foreign investors. You may also have noticed that, beginning from the year before last, we have been working specifically on foreign investor relations management, such as by inviting QFII investors to visit some of the listed companies in China. You also mentioned that they were very much interested in China's domestic listed companies, especially those enterprises with good growth potential. We have special English websites, which serve as a window for servicing foreign investors, and Market Bulletin, which provide them timely access to the information of the domestic listed companies of interest to them. This year, we are going to go deeper and wider in this respect, to meet the needs of institutional investors, and continue to organize visits for them to the listed companies they have interest in.
China Economic Weekly: Ms. Song, just now, you brought up the amendments to the Securities Law. That is something every one of us is looking forward to. And I would like to know what your thoughts are about this in terms of its idea and direction. Thank you.
Song Liping: I hope that several aspects can be covered in the amendments to the Securities Law this time. Like private placement that I just mentioned. The original Securities Law has made very clear provisions for public placement, but not for private placement. And regional market, which is a relatively blank area in law. But it is also very important, especially for small and medium-sized enterprises, and is playing an ever increasing role in supporting regional economic development. And it will be just in time to have it modified during the amendments to the Securities Law this year.
AAStocks: I would like to have your views on the strategic emerging industries board, as well as the framework of cooperation between the SZSE and HKEx. Thank you.
Song Liping: I have noticed that Chairman Gui also raised a proposal this time. It shows that the emerging industries have been drawing attention from many more areas and market forces. This is indeed very advantageous to their development. This year marks the fifth year of the ChiNext Market. Well, during its development course of nearly five years, it has attracted a batch of emerging industries like the Internet, new energy, environmental protection, health and culture to go public, and has proven to be fruitful to a certain extent. But the ChiNext Board is still a long way away from what it was primarily designed for and what the market is expecting of it, both in terms of its current development and its staged achievements. Just now, you have mentioned the IPO refinancing system of the ChiNext Board. This system is also in a process of constant improvements.
Well, after the launch of the ChiNext Market, we all are still seeing companies like Dangdang, Alibaba, choose to be listed on overseas markets. Previously, such as in the 1990s, all of the three major portals in our country went overseas to be listed, because we hadn't the ChiNext Board at that time. But now, after the ChiNext Board was made available, why is that these enterprises are still getting listed overseas? This is something really worth reflecting on.
In addition, the ChiNext Market isn't large in scale. Totally 379 companies were listed on it, with a combined market value of 1.7 trillion. Tencent was listed in Hong Kong. It is a Shenzhen-based company, with a market value worth nearly one trillion. The market value of Tencent alone exceeds more than half of the total market value of the 379 companies, so it can be said that the ChiNext Board is indeed of a relatively small scale. Small scale would easily lead to instability. On the other hand, as a matter of fact, we launched the ChiNext Board after careful analyses of over 40 Second Board Markets across the world. The Nasdaq is the most successful of them, and our ChiNext Board is developed based on it.
But whether it is in terms of scale or system, I think, currently, we are in a very critical period of growth and development. The Central Committee of CPC has, in particular, put forward the strategy of deploying the innovation chain around the central industry chain, and perfecting the capital chain around the innovation chain. The ChiNext Market plays a very important role in integrating the industrial chain, the innovation chain and the capital chain. We are keenly aware of the enormous responsibility on our shoulders, and are acting most cautiously as if treading on thin ice. To be frank, in its critical period of development, we are recommending that we go all out to build the ChiNext Board into a better market, and live up to our mission.
When it comes to the cooperation between Shenzhen and Hong Kong, on the one hand, our information is interchangeable, and there is a natural advantage for cooperation between the two sides. Two years ago, we have contributed to set up the China Index Services Company, together with HKEx, and of course, the SSE. This is the product of joint efforts in developing the Greater China Region.
There is one more thing, the B- to H- share conversion, as you may have taken an interest in. Two companies have already successfully converted their B shares into H shares, CIMC and Livzon. Vanke's recent program for B- to H- share conversion was also approved by the CSRC. This not only served as a very beneficial exploration effort into the financial cooperation between Shenzhen and Hong Kong, but also helped build up experiences.
China Business Network TV: Two questions about the board transfer mechanism. What is the main idea in its design? And how is it faring currently?
Song Liping: The board transfer mechanism is indeed very important. First, there should be clear and fair positioning for each board. For example, I just mentioned that the ChiNext Market only had over 300 companies listed on it after nearly five years. The SME Board has been up and running for ten years. But only 719 companies have been listed on it and their combined market value is just around 4 trillion. So first of all, we have to build a solid market base for each board. This, I think, is our top priority.
It is the same with the New Third Board. After it was expanded across the country last year, it has begun to show signs of very promising development. Well, even in this process of development, it is essentially at the very beginning, and still requires a lot of effort to be taken in aspects of system design, enterprise listing, promotions and many more.
It is on this basis, and according to the needs of market development, and system arrangements that we should implement the board transfer mechanism. Here is involved the "way of introduction". And the support of legal system is also required.
Caixin Magazine: As mentioned by Chairman Gui Minjie, the strategic emerging industries board may overlap with the ChiNext Market to a certain extent, and competition will still exist between the two, though they are in different orientations. He said that competition was a good thing, but was not sure about what the SZSE would be doing to get prepared for this?
Song Liping: First of all, we will do our best to build and improve the ChiNext Market. This is something I already explained to you just now. It is very important for the development of China's economy as a whole to maintain healthy competition with the SSE and galvanize mutual development. Though China is the world's second largest economy, development level and scale of its capital market lags far behind. The current economic structure in our country is characterized by diversity. There are the development of emerging industries and transformation of traditional industries. The reform of state-owned enterprises, fostering of private economy and development of mixed ownership go side by side. So the ChiNext market has been charged with a lot of heavy tasks. But this also presents us with great opportunities.
The two exchanges are the direct product of reform and opening-up. Over the past 20 years, it is reform that has been driving the development of the exchanges. Therefore, amidst a new round of efforts in comprehensively deepening the reform, our two exchanges will see huge space for development. To my point of view, the two exchanges may play a better and bigger role in the nation’s economic development as a whole, if they strive for differentiated development while leveraging their own unique advantages.
PAN>
Shanghai Evening Post: Ms. Song, a question about trading channels. We found that the new shares listed were always bought by a fixed group of hot money institutions. This may seem to be an unfair trade for some investors. There may be possible VIP trading channels, according to media reports. What's your view on this?
Song Liping: From the perspective of the exchange, it is the same as specified by the trading rules. We provide the same trading channels for all of our members.
China Business News: Ms. Song, since the IPO restart, there has been no change in the "frenzied speculation" of newly listed shares, especially on the ChiNext Market which has maintained a relatively high PE ratio. If there is any risk, do you think, in this phenomenon? How could it be improved? Also, Chairman Xiao has noted that a lot of effort will be put in developing the private market this year. We are wondering what measures will be taken in this respect. Thank you.
Song Liping: Your first question is already answered by Chairman Chen the day before yesterday. We are now actively working on mechanisms to settle the suspension of new shares on the first day of their listings.
Your second question is about the ChiNext Market. Indeed, last year has seen a structural price rise in the Board. But because the ChiNext index is only the constituent index of 100 stocks, its rise does not mean that the prices of all the stocks of the over 300 companies listed on the ChiNext Market are rising. And even in the 100 constituent stocks of the ChiNext Board, there is also a structural rise. For example, in the information technology, telecommunications, discretionary consumption and health & medicine industries, the constituent stocks of the ChiNext Market has made a 72% contribution to the rise in the ChiNext Stock Index. The top 20 companies have made a cumulative contribution of 58%.
The third question relates to private placement. Ms Wu Xiaoling mentioned in a press interview yesterday that this was covered by the Securities Law. I think the private placement market is a very important part, and we are also hoping that modifications to the part of private placement can also be included in the amendments to the Securities Law this year, so as to provide legal safeguard for its development.
Specifically, the SZSE will continue to develop SME private placement bonds. So far, nearly 200 enterprises have issued SME private placement bonds, and have raised nearly 20 billion, but this is still some distance away from what we have originally expected. The power of the buyside is still very weak. The market is still accustomed to public placement products. Once private placement comes to play, the customer management ability of our intermediary institutions and the constraints of the buyers are under severe test, because private products require the buyers to be very highly capable of identifying risks.
Exchangeable bonds are also a product we are paying special attention to. Because substantial shareholders are reluctant to reduce their shares in the short term, but they also have to meet their financing demand. Then what's to be done? We can offer such a channel right within the market. We can pledge the stocks first, and then issue exchangeable bonds. The substantial shareholder of a stock on the ChiNext Board has already issued exchangeable bonds. These are all private placement products.
Private placement products are enjoying very broad prospects. On the one hand, institutional improvements should be made, and on the other hand, intermediary institutions should also attach great importance to the development of private placement products.
Chinese Securities Journal: A question about the guidelines for information disclosure by industry. We have made a report about a listed company. It turned out that their prospectus did not conform to the Guidelines for Information Disclosure. According to the SZSE, it was formerly an IPO company but was not listed, and instead of being bound by the Guidelines for Information Disclosure by Industry, it may make disclosure by means of prospectus, before it was listed. So the SZSE could not make a judgment on this. I would like to ask when the guidelines for information disclosure by industry of the SZSE will cover a category of listed companies like these.
Song Liping: This involves the seamless connection between issuing and listing. Particularly, in the environment of our current market, the issuance cycle is very long. Sometimes after issuing is completed, there is still a period of time to wait before listing. So how can we realize connection between issuing and listing? This is a very important matter, and we have already begun working on it. The question you raised is just one part of it, and there are some other post-meeting issues. Over the past two years, we have gradually taken several measures to achieve seamless connection.
21st Century Business Herald: Big data played a great role in the various case clues of the exchange last year. Could you say more about how we were doing last year, in terms of big data application and law enforcement, and what we can do to improve for the future?
Song Liping: Intelligent market regulation has been one of our key priorities, and we have a special team dedicated to this. Because the original information was widely scattered, we had to put it all together. We have had a hard time assimilating the data mining and text mining technologies, as these technologies did present some difficulties to us, realistically speaking. Then we had set up a special team to study the American Sonar system, that is, to collect all aspects of information. But as you know, there are some differences in Chinese and English text information. And we faced this kind of problem during the implementation process. This is one of the bottlenecks we have encountered for now.
Well, you may also have known something about our real-time monitoring of share prices. In fact, this type of monitoring has already covered the information monitoring of listed companies. This was the biggest change we made last year. It has also found application in other areas. For example, for an increasing number of underlying securities in securities margin trading, we were applying big data in their risk assessment and monitoring, and furthermore, it was also used in the products involving stock right pledge. It is now moving gradually towards full coverage.
China Securities Journal: How will the reform of ChiNext Refinancing be like this year? Will there be any new products?
Song Liping: Last year, the State Council has approved preferred stocks. The CSRC has prepared a public opinion soliciting draft of administrative measures for pilot projects of preferred stocks. The listed companies will add a new class of preferred stocks in the former refinancing categories.
China Daily: What are the highlights of refinancing rules for the ChiNext Board? For example, who will set the amount? How will the industry be adjusted? In addition, as international investors are very much interested in the ChiNext Maekwr, thinking that it is the representative of China's new economy, I would like to ask what measures the SZSE will take in this respect, as far as the foreign investors are concerned.
Song Liping: ChiNext Market refinancing rules were organized and finally promulgated by the CSRC. It is not our administrative measures for refinancing, and we are only participants. I think we all will see the final version soon, which will prove to be better. We are hoping that we can adapt to the characteristics of the companies listed on the ChiNext Market, and implement the small-amount fast refinancing mechanism we have been promoting for years.
Your second question relates to foreign investors. You may also have noticed that, beginning from the year before last, we have been working specifically on foreign investor relations management, such as by inviting QFII investors to visit some of the listed companies in China. You also mentioned that they were very much interested in China's domestic listed companies, especially those enterprises with good growth potential. We have special English websites, which serve as a window for servicing foreign investors, and Market Bulletin, which provide them timely access to the information of the domestic listed companies of interest to them. This year, we are going to go deeper and wider in this respect, to meet the needs of institutional investors, and continue to organize visits for them to the listed companies they have interest in.
China Economic Weekly: Ms. Song, just now, you brought up the amendments to the Securities Law. That is something every one of us is looking forward to. And I would like to know what your thoughts are about this in terms of its idea and direction. Thank you.
Song Liping: I hope that several aspects can be covered in the amendments to the Securities Law this time. Like private placement that I just mentioned. The original Securities Law has made very clear provisions for public placement, but not for private placement. And regional market, which is a relatively blank area in law. But it is also very important, especially for small and medium-sized enterprises, and is playing an ever increasing role in supporting regional economic development. And it will be just in time to have it modified during the amendments to the Securities Law this year.
AAStocks: I would like to have your views on the strategic emerging industries board, as well as the framework of cooperation between the SZSE and HKEx. Thank you.
Song Liping: I have noticed that Chairman Gui also raised a proposal this time. It shows that the emerging industries have been drawing attention from many more areas and market forces. This is indeed very advantageous to their development. This year marks the fifth year of the ChiNext Market. Well, during its development course of nearly five years, it has attracted a batch of emerging industries like the Internet, new energy, environmental protection, health and culture to go public, and has proven to be fruitful to a certain extent. But the ChiNext Board is still a long way away from what it was primarily designed for and what the market is expecting of it, both in terms of its current development and its staged achievements. Just now, you have mentioned the IPO refinancing system of the ChiNext Board. This system is also in a process of constant improvements.
Well, after the launch of the ChiNext Market, we all are still seeing companies like Dangdang, Alibaba, choose to be listed on overseas markets. Previously, such as in the 1990s, all of the three major portals in our country went overseas to be listed, because we hadn't the ChiNext Board at that time. But now, after the ChiNext Board was made available, why is that these enterprises are still getting listed overseas? This is something really worth reflecting on.
In addition, the ChiNext Market isn't large in scale. Totally 379 companies were listed on it, with a combined market value of 1.7 trillion. Tencent was listed in Hong Kong. It is a Shenzhen-based company, with a market value worth nearly one trillion. The market value of Tencent alone exceeds more than half of the total market value of the 379 companies, so it can be said that the ChiNext Board is indeed of a relatively small scale. Small scale would easily lead to instability. On the other hand, as a matter of fact, we launched the ChiNext Board after careful analyses of over 40 Second Board Markets across the world. The Nasdaq is the most successful of them, and our ChiNext Board is developed based on it.
But whether it is in terms of scale or system, I think, currently, we are in a very critical period of growth and development. The Central Committee of CPC has, in particular, put forward the strategy of deploying the innovation chain around the central industry chain, and perfecting the capital chain around the innovation chain. The ChiNext Market plays a very important role in integrating the industrial chain, the innovation chain and the capital chain. We are keenly aware of the enormous responsibility on our shoulders, and are acting most cautiously as if treading on thin ice. To be frank, in its critical period of development, we are recommending that we go all out to build the ChiNext Board into a better market, and live up to our mission.
When it comes to the cooperation between Shenzhen and Hong Kong, on the one hand, our information is interchangeable, and there is a natural advantage for cooperation between the two sides. Two years ago, we have contributed to set up the China Index Services Company, together with HKEx, and of course, the SSE. This is the product of joint efforts in developing the Greater China Region.
There is one more thing, the B- to H- share conversion, as you may have taken an interest in. Two companies have already successfully converted their B shares into H shares, CIMC and Livzon. Vanke's recent program for B- to H- share conversion was also approved by the CSRC. This not only served as a very beneficial exploration effort into the financial cooperation between Shenzhen and Hong Kong, but also helped build up experiences.
China Business Network TV: Two questions about the board transfer mechanism. What is the main idea in its design? And how is it faring currently?
Song Liping: The board transfer mechanism is indeed very important. First, there should be clear and fair positioning for each board. For example, I just mentioned that the ChiNext Market only had over 300 companies listed on it after nearly five years. The SME Board has been up and running for ten years. But only 719 companies have been listed on it and their combined market value is just around 4 trillion. So first of all, we have to build a solid market base for each board. This, I think, is our top priority.
It is the same with the New Third Board. After it was expanded across the country last year, it has begun to show signs of very promising development. Well, even in this process of development, it is essentially at the very beginning, and still requires a lot of effort to be taken in aspects of system design, enterprise listing, promotions and many more.
It is on this basis, and according to the needs of market development, and system arrangements that we should implement the board transfer mechanism. Here is involved the "way of introduction". And the support of legal system is also required.
Caixin Magazine: As mentioned by Chairman Gui Minjie, the strategic emerging industries board may overlap with the ChiNext Market to a certain extent, and competition will still exist between the two, though they are in different orientations. He said that competition was a good thing, but was not sure about what the SZSE would be doing to get prepared for this?
Song Liping: First of all, we will do our best to build and improve the ChiNext Market. This is something I already explained to you just now. It is very important for the development of China's economy as a whole to maintain healthy competition with the SSE and galvanize mutual development. Though China is the world's second largest economy, development level and scale of its capital market lags far behind. The current economic structure in our country is characterized by diversity. There are the development of emerging industries and transformation of traditional industries. The reform of state-owned enterprises, fostering of private economy and development of mixed ownership go side by side. So the ChiNext market has been charged with a lot of heavy tasks. But this also presents us with great opportunities.
The two exchanges are the direct product of reform and opening-up. Over the past 20 years, it is reform that has been driving the development of the exchanges. Therefore, amidst a new round of efforts in comprehensively deepening the reform, our two exchanges will see huge space for development. To my point of view, the two exchanges may play a better and bigger role in the nation’s economic development as a whole, if they strive for differentiated development while leveraging their own unique advantages.
PAN>
Shanghai Evening Post: Ms. Song, a question about trading channels. We found that the new shares listed were always bought by a fixed group of hot money institutions. This may seem to be an unfair trade for some investors. There may be possible VIP trading channels, according to media reports. What's your view on this?
Song Liping: From the perspective of the exchange, it is the same as specified by the trading rules. We provide the same trading channels for all of our members.
China Business News: Ms. Song, since the IPO restart, there has been no change in the "frenzied speculation" of newly listed shares, especially on the ChiNext Market which has maintained a relatively high PE ratio. If there is any risk, do you think, in this phenomenon? How could it be improved? Also, Chairman Xiao has noted that a lot of effort will be put in developing the private market this year. We are wondering what measures will be taken in this respect. Thank you.
Song Liping: Your first question is already answered by Chairman Chen the day before yesterday. We are now actively working on mechanisms to settle the suspension of new shares on the first day of their listings.
Your second question is about the ChiNext Market. Indeed, last year has seen a structural price rise in the Board. But because the ChiNext index is only the constituent index of 100 stocks, its rise does not mean that the prices of all the stocks of the over 300 companies listed on the ChiNext Market are rising. And even in the 100 constituent stocks of the ChiNext Board, there is also a structural rise. For example, in the information technology, telecommunications, discretionary consumption and health & medicine industries, the constituent stocks of the ChiNext Market has made a 72% contribution to the rise in the ChiNext Stock Index. The top 20 companies have made a cumulative contribution of 58%.
The third question relates to private placement. Ms Wu Xiaoling mentioned in a press interview yesterday that this was covered by the Securities Law. I think the private placement market is a very important part, and we are also hoping that modifications to the part of private placement can also be included in the amendments to the Securities Law this year, so as to provide legal safeguard for its development.
Specifically, the SZSE will continue to develop SME private placement bonds. So far, nearly 200 enterprises have issued SME private placement bonds, and have raised nearly 20 billion, but this is still some distance away from what we have originally expected. The power of the buyside is still very weak. The market is still accustomed to public placement products. Once private placement comes to play, the customer management ability of our intermediary institutions and the constraints of the buyers are under severe test, because private products require the buyers to be very highly capable of identifying risks.
Exchangeable bonds are also a product we are paying special attention to. Because substantial shareholders are reluctant to reduce their shares in the short term, but they also have to meet their financing demand. Then what's to be done? We can offer such a channel right within the market. We can pledge the stocks first, and then issue exchangeable bonds. The substantial shareholder of a stock on the ChiNext Board has already issued exchangeable bonds. These are all private placement products.
Private placement products are enjoying very broad prospects. On the one hand, institutional improvements should be made, and on the other hand, intermediary institutions should also attach great importance to the development of private placement products.
Chinese Securities Journal: A question about the guidelines for information disclosure by industry. We have made a report about a listed company. It turned out that their prospectus did not conform to the Guidelines for Information Disclosure. According to the SZSE, it was formerly an IPO company but was not listed, and instead of being bound by the Guidelines for Information Disclosure by Industry, it may make disclosure by means of prospectus, before it was listed. So the SZSE could not make a judgment on this. I would like to ask when the guidelines for information disclosure by industry of the SZSE will cover a category of listed companies like these.
Song Liping: This involves the seamless connection between issuing and listing. Particularly, in the environment of our current market, the issuance cycle is very long. Sometimes after issuing is completed, there is still a period of time to wait before listing. So how can we realize connection between issuing and listing? This is a very important matter, and we have already begun working on it. The question you raised is just one part of it, and there are some other post-meeting issues. Over the past two years, we have gradually taken several measures to achieve seamless connection.
21st Century Business Herald: Big data played a great role in the various case clues of the exchange last year. Could you say more about how we were doing last year, in terms of big data application and law enforcement, and what we can do to improve for the future?
Song Liping: Intelligent market regulation has been one of our key priorities, and we have a special team dedicated to this. Because the original information was widely scattered, we had to put it all together. We have had a hard time assimilating the data mining and text mining technologies, as these technologies did present some difficulties to us, realistically speaking. Then we had set up a special team to study the American Sonar system, that is, to collect all aspects of information. But as you know, there are some differences in Chinese and English text information. And we faced this kind of problem during the implementation process. This is one of the bottlenecks we have encountered for now.
Well, you may also have known something about our real-time monitoring of share prices. In fact, this type of monitoring has already covered the information monitoring of listed companies. This was the biggest change we made last year. It has also found application in other areas. For example, for an increasing number of underlying securities in securities margin trading, we were applying big data in their risk assessment and monitoring, and furthermore, it was also used in the products involving stock right pledge. It is now moving gradually towards full coverage.
China Securities Journal: How will the reform of ChiNext Refinancing be like this year? Will there be any new products?
Song Liping: Last year, the State Council has approved preferred stocks. The CSRC has prepared a public opinion soliciting draft of administrative measures for pilot projects of preferred stocks. The listed companies will add a new class of preferred stocks in the former refinancing categories.
China Daily: What are the highlights of refinancing rules for the ChiNext Board? For example, who will set the amount? How will the industry be adjusted? In addition, as international investors are very much interested in the ChiNext Maekwr, thinking that it is the representative of China's new economy, I would like to ask what measures the SZSE will take in this respect, as far as the foreign investors are concerned.
Song Liping: ChiNext Market refinancing rules were organized and finally promulgated by the CSRC. It is not our administrative measures for refinancing, and we are only participants. I think we all will see the final version soon, which will prove to be better. We are hoping that we can adapt to the characteristics of the companies listed on the ChiNext Market, and implement the small-amount fast refinancing mechanism we have been promoting for years.
Your second question relates to foreign investors. You may also have noticed that, beginning from the year before last, we have been working specifically on foreign investor relations management, such as by inviting QFII investors to visit some of the listed companies in China. You also mentioned that they were very much interested in China's domestic listed companies, especially those enterprises with good growth potential. We have special English websites, which serve as a window for servicing foreign investors, and Market Bulletin, which provide them timely access to the information of the domestic listed companies of interest to them. This year, we are going to go deeper and wider in this respect, to meet the needs of institutional investors, and continue to organize visits for them to the listed companies they have interest in.
China Economic Weekly: Ms. Song, just now, you brought up the amendments to the Securities Law. That is something every one of us is looking forward to. And I would like to know what your thoughts are about this in terms of its idea and direction. Thank you.
Song Liping: I hope that several aspects can be covered in the amendments to the Securities Law this time. Like private placement that I just mentioned. The original Securities Law has made very clear provisions for public placement, but not for private placement. And regional market, which is a relatively blank area in law. But it is also very important, especially for small and medium-sized enterprises, and is playing an ever increasing role in supporting regional economic development. And it will be just in time to have it modified during the amendments to the Securities Law this year.
AAStocks: I would like to have your views on the strategic emerging industries board, as well as the framework of cooperation between the SZSE and HKEx. Thank you.
Song Liping: I have noticed that Chairman Gui also raised a proposal this time. It shows that the emerging industries have been drawing attention from many more areas and market forces. This is indeed very advantageous to their development. This year marks the fifth year of the ChiNext Market. Well, during its development course of nearly five years, it has attracted a batch of emerging industries like the Internet, new energy, environmental protection, health and culture to go public, and has proven to be fruitful to a certain extent. But the ChiNext Board is still a long way away from what it was primarily designed for and what the market is expecting of it, both in terms of its current development and its staged achievements. Just now, you have mentioned the IPO refinancing system of the ChiNext Board. This system is also in a process of constant improvements.
Well, after the launch of the ChiNext Market, we all are still seeing companies like Dangdang, Alibaba, choose to be listed on overseas markets. Previously, such as in the 1990s, all of the three major portals in our country went overseas to be listed, because we hadn't the ChiNext Board at that time. But now, after the ChiNext Board was made available, why is that these enterprises are still getting listed overseas? This is something really worth reflecting on.
In addition, the ChiNext Market isn't large in scale. Totally 379 companies were listed on it, with a combined market value of 1.7 trillion. Tencent was listed in Hong Kong. It is a Shenzhen-based company, with a market value worth nearly one trillion. The market value of Tencent alone exceeds more than half of the total market value of the 379 companies, so it can be said that the ChiNext Board is indeed of a relatively small scale. Small scale would easily lead to instability. On the other hand, as a matter of fact, we launched the ChiNext Board after careful analyses of over 40 Second Board Markets across the world. The Nasdaq is the most successful of them, and our ChiNext Board is developed based on it.
But whether it is in terms of scale or system, I think, currently, we are in a very critical period of growth and development. The Central Committee of CPC has, in particular, put forward the strategy of deploying the innovation chain around the central industry chain, and perfecting the capital chain around the innovation chain. The ChiNext Market plays a very important role in integrating the industrial chain, the innovation chain and the capital chain. We are keenly aware of the enormous responsibility on our shoulders, and are acting most cautiously as if treading on thin ice. To be frank, in its critical period of development, we are recommending that we go all out to build the ChiNext Board into a better market, and live up to our mission.
When it comes to the cooperation between Shenzhen and Hong Kong, on the one hand, our information is interchangeable, and there is a natural advantage for cooperation between the two sides. Two years ago, we have contributed to set up the China Index Services Company, together with HKEx, and of course, the SSE. This is the product of joint efforts in developing the Greater China Region.
There is one more thing, the B- to H- share conversion, as you may have taken an interest in. Two companies have already successfully converted their B shares into H shares, CIMC and Livzon. Vanke's recent program for B- to H- share conversion was also approved by the CSRC. This not only served as a very beneficial exploration effort into the financial cooperation between Shenzhen and Hong Kong, but also helped build up experiences.
China Business Network TV: Two questions about the board transfer mechanism. What is the main idea in its design? And how is it faring currently?
Song Liping: The board transfer mechanism is indeed very important. First, there should be clear and fair positioning for each board. For example, I just mentioned that the ChiNext Market only had over 300 companies listed on it after nearly five years. The SME Board has been up and running for ten years. But only 719 companies have been listed on it and their combined market value is just around 4 trillion. So first of all, we have to build a solid market base for each board. This, I think, is our top priority.
It is the same with the New Third Board. After it was expanded across the country last year, it has begun to show signs of very promising development. Well, even in this process of development, it is essentially at the very beginning, and still requires a lot of effort to be taken in aspects of system design, enterprise listing, promotions and many more.
It is on this basis, and according to the needs of market development, and system arrangements that we should implement the board transfer mechanism. Here is involved the "way of introduction". And the support of legal system is also required.
Caixin Magazine: As mentioned by Chairman Gui Minjie, the strategic emerging industries board may overlap with the ChiNext Market to a certain extent, and competition will still exist between the two, though they are in different orientations. He said that competition was a good thing, but was not sure about what the SZSE would be doing to get prepared for this?
Song Liping: First of all, we will do our best to build and improve the ChiNext Market. This is something I already explained to you just now. It is very important for the development of China's economy as a whole to maintain healthy competition with the SSE and galvanize mutual development. Though China is the world's second largest economy, development level and scale of its capital market lags far behind. The current economic structure in our country is characterized by diversity. There are the development of emerging industries and transformation of traditional industries. The reform of state-owned enterprises, fostering of private economy and development of mixed ownership go side by side. So the ChiNext market has been charged with a lot of heavy tasks. But this also presents us with great opportunities.
The two exchanges are the direct product of reform and opening-up. Over the past 20 years, it is reform that has been driving the development of the exchanges. Therefore, amidst a new round of efforts in comprehensively deepening the reform, our two exchanges will see huge space for development. To my point of view, the two exchanges may play a better and bigger role in the nation’s economic development as a whole, if they strive for differentiated development while leveraging their own unique advantages.