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On October 9, 2020, the State Council issued the Opinions on Further Improving the Quality of Listed Companies (Guo Fa [2020] No. 14 Document) (the Opinions for short), which makes comprehensive and systematic deployments and arrangements for improving the quality of listed companies. As a major decision and deployment of the CPC Central Committee and the State Council, improving the quality of listed companies is an important move to consolidate the foundation for the reform and development of the capital market and serve the real economy. The release of the Opinions is of great significance for boosting the improvement of the quality of listed companies, pooling resources, and cultivating and forming the institutional mechanism and environment for enhancing the quality of listed companies. It is also highly important for implementing the requirements for the “stability on the six fronts (ensuring stability in employment, financial operations, foreign trade, foreign investment, domestic investment, and expectations)” and the “security in the six aspects (ensuring security in job, basic living needs, operations of market entities, food and energy security, stable industrial and supply chains, and the normal functioning of primary-level governments)” and propelling the healthy development of the real economy, as the Opinions provides the fundamental guidelines for the capital market to work further on improving the quality of the listed companies, as well as a crucial guarantee for building a capital market that is regulated, transparent, open, dynamic and resilient.
As listed companies are the cornerstone of the capital market, the capital market will not be well developed without quality listed companies. Currently, there are more than 4,000 companies listed on the Shanghai Stock Exchange (SSE) and the Shenzhen Stock Exchange (SZSE). In particular, the SSE market has attracted a large number of high-quality blue-chip companies and technological innovation-oriented enterprises characterized by focus on their main businesses, excellent performance, regulated governance and transparent information disclosure, which have become the "main force" of the national economy and the "vanguard" in the sci-tech innovation, basically covering key leading companies in different industries and enterprises with strong core competitiveness in specific areas. Last year, the companies listed on the SSE main board recorded an operating income of RMB37.21 trillion, accounting for more than 70% of the total on the A-share market and nearly 40% of the total GDP; their net profit amounted to RMB3.19 trillion, accounting for about 85% of the A-share market’s total; their dividends stood at RMB1.07 trillion, a share of nearly 80% of the whole market. The companies on the SSE STAR Market saw their revenue grow by 14% year-on-year, their net profit expand by 25% year-on-year, and their R&D investment reach new highs, having achieved a number of breakthroughs in sci-tech innovation. At the same time, we should also be aware that with the changes in the internal and external situations in recent years, some companies have fallen into trouble, some have experienced intensive risks, and the market has seen some lingering problems such as financial fraud, capital occupation and illegal guarantees increase. Since the beginning of this year, due to the impacts of the COVID-19 pandemic and other factors, the listed companies have been facing new challenges in production and operation. In this context, it can be said that the Opinions was released at the right time, providing strong guarantees and support for improving the quality of listed companies in terms of systems and mechanisms, serving as the targeted measures to address the urgent problems for the companies at present, and further consolidating the foundation for the continuous, stable and healthy development of the capital market.
The SSE acts as the main battlefield for the reform and development of the capital market. As the market organizer, manager and service provider, the SSE has never shirked the responsibility in propelling the improvement of the quality of listed companies. The SSE has always centered the key tasks around the theme of boosting the improvement of the quality of listed companies. In establishing the SSE STAR Market and piloting the registration-based IPO system, the SSE has effectively checked the access, enhanced the inclusiveness, and supported the financing of various sci-tech innovation-characterized enterprises in different models through listing. The SSE has streamlined and optimized the system of rules, strived to improve the quality of information disclosure on industry and finance in periodical reports, encouraged the listed companies to enhance voluntary information disclosure, and vigorously promoted briefings on performance, so as to highlight the company's value and improve its quality by making information disclosure more effective. The SSE has closely monitored the "critical few", paid special attention to market irregularities, cracked down on financial fraud, and pushed listed companies for compliant development and quality improvement by optimizing regulation. The SSE has advanced the innovation in the continuous regulation systems for mergers and acquisitions and reorganizations, refinancing, equity incentives and shareholding reduction, etc., boosted product innovation in the bond market, strived to provide a more favorable institutional environment for the companies to strengthen their main businesses, transform and upgrade and enhance their capacity for sci-tech innovation, and backed the companies in effectively using the capital tools to make themselves better and stronger. The SSE has set up specific service mechanisms, implemented the "Three-year Action Plan for Reform of State-owned Enterprises", and supported central and local state-owned enterprises in advancing the mixed-ownership reform so as to enhance business vitality. The SSE has stepped up the efforts in defusing risks, made steady progress in the resolution of the risk in stock pledge, strived to help private enterprises out of difficulties, and improved its services to enhance the listed companies’ satisfaction and sense of gain.
In November last year, the China Securities Regulatory Commission (CSRC) formulated the Action Plan for Propelling the Improvement of the Quality of Listed Companies. The SSE has established a special working group to fully implement the requirements of the action plan and work with all parties concerned to boost the improvement of the quality of listed companies. Going forward, the SSE will earnestly implement the deployments in the Opinions issued by the State Council, effectively put the requirements of the CSRC into practice, uphold the spirit of reform and innovation, take responsibility, dedicate itself to service, and take it as its honorable mission to drive the improvement of the quality of listed companies. In the near future, the SSE will make efforts in the following aspects. First is establishing mechanisms. The SSE will strive to cultivate a market restraint mechanism, giving better treatment to companies that perform well and putting restraints on companies that perform poorly, and reform and improve the basic systems such as the registration-based IPO, delisting, mergers and acquisitions and reorganizations, refinancing and trading. Second is shaping the ecology. The SSE will work with all parties concerned to shape the ecology, leveraging the important role of the “critical few” including actual controllers, controlling shareholders, directors, supervisors and senior executives, urge the intermediary agencies to effectively act as “gatekeepers”, and vigorously collaborate with local governments to form synergy. Third is attaching importance to regulation. The SSE will strengthen targeted regulation, guide the companies in conducting operations in a regulated manner, focus on prominent problems such as financial fraud, capital occupation and illegal guarantees, and properly handle and defuse risks; the SSE will identify problems early and correct them while they are nascent on the SSE STAR Market so as to prevent the recurrence of the irregularities. Fourth is improving services. The SSE will enhance its tailored services, continue to effectively provide services such as regular consultation and training, offer dedicated services in key regions, build the SSE market into the main battlefield for implementing the "Three-year Action Plan for Reform of State-owned Enterprises", and actively build platforms and pool resources to help private enterprises out of difficulties.
