Several Opinions of the State Council on Strengthening Regulation, Preventing Risks, and Promoting High-Quality Development of the Capital Market

National Development Document No. 10 of 2024

People's Governments of all provinces, autonomous regions, and municipalities directly under the central government; all ministries and commissions of the State Council and all institutions directly affiliated with it:

Since the 18th National Congress of the Communist Party of China, China’s capital market has experienced rapid development and has played a significant role in promoting optimal allocation of resources, driving rapid economic growth and long-term social stability, and supporting scientific and technological innovation. To thoroughly implement the spirit of the Central Financial Work Conference and further promote high-quality development of the capital market, we hereby put forward the following recommendations.

I. General Requirements

Guided by Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, we will fully implement the spirit of the 20th National Congress of the Party and the Second Plenary Session of the 20th Central Committee, uphold the new development philosophy, and focus closely on building a capital market that is safe, standardized, transparent, open, dynamic, and resilient. We will adhere to integrating the general principles of capital markets with China’s specific national and local conditions, firmly uphold the political nature and people-centered approach in capital market work, take strong regulation, risk prevention, and promotion of high-quality development as our main priorities, and place particular emphasis on improving the fundamental institutional framework of the capital market. In doing so, we will better leverage the functions and roles of the capital market, advance the building of a financially strong nation, and serve the broader goal of Chinese-style modernization.

We must deeply grasp the core essence of high-quality development of the capital market and ensure its stable and healthy growth by serving major national strategies and promoting high-quality economic and social development. We must uphold and strengthen Party leadership, fully leveraging the Party’s political, organizational, and institutional advantages to ensure that the capital market always stays on the right track. We must consistently practice the principle of finance serving the people, emphasizing a people-centered value orientation, more effectively safeguarding the legitimate rights and interests of investors—especially small and medium-sized investors—and helping better meet the growing wealth-management needs of the general public. We must comprehensively strengthen regulation and effectively prevent and resolve risks, keeping stability as the guiding principle and rigor as the top priority, ensuring that regulatory measures are both tough and effective, with clear teeth and sharp edges. We must steadfastly adhere to the principles of marketization and rule of law, focusing on goal-oriented and problem-oriented approaches, further deepening reform of the capital market in a comprehensive manner, and striking a balance between opening up and ensuring security. We must firmly grasp the theme of high-quality development, uphold integrity while fostering innovation, and provide even stronger support for key areas of the national economy and the building of a modern industrial system.

Over the next five years, we will basically establish a comprehensive framework for high-quality development of the capital market. The institutional mechanisms for investor protection will be further improved. The quality and structure of listed companies will be significantly optimized, and the strength and service capabilities of securities, fund, and futures institutions will continue to grow. The regulatory capacity and effectiveness of the capital market will be substantially enhanced, and a sound ecosystem for the capital market will accelerate its formation. By 2035, we will have basically built a capital market that is highly adaptable, competitive, and inclusive, with more effective protection of investors’ legitimate rights and interests. The structure of investment and financing will tend toward rationality, the quality of listed companies will markedly improve, and significant progress will have been made in building first-class investment banks and investment institutions. The regulatory systems and mechanisms of the capital market will become even more complete. By mid-century, the modernization level of the capital market’s governance system and governance capabilities will be further enhanced, and we will have established a high-quality capital market that matches our status as a financial powerhouse.

II. Strictly control the admission criteria for issuance and listing.

Further refine the issuance and listing system. Raise the listing standards for the Main Board and the ChiNext Board, and improve the evaluation criteria for the science and technology innovation attributes of the STAR Market. Enhance the quality and effectiveness of pre-IPO guidance, and expand the coverage of on-site inspections of companies under review as well as relevant intermediary agencies. Clearly stipulate that dividend policies must be disclosed upon listing. Include instances of “wholesale” dividend distributions conducted just before listing in the negative list for issuance and listing. Strengthen regulatory oversight of spin-off listings. Strictly scrutinize and control refinancing applications.

Strengthen accountability across the entire chain of issuance and listing. Further reinforce the exchange’s primary responsibility for review, refine the mechanisms for establishing and operating the Stock Listing Committee, and enhance oversight throughout the entire process of committee members’ performance of their duties. Establish a mechanism for retrospective accountability and tracing of responsibility. Further enforce the issuer’s primary responsibility and the “gatekeeper” role of intermediary agencies, and introduce a “blacklist” system for intermediaries. Adhere to the principle of “taking responsibility upon filing,” and rigorously investigate and punish illegal and non-compliant practices such as fraudulent issuance.

Strengthen regulatory oversight of underwriting and issuance. Enhance supervision over all stages of new-stock issuance—including inquiry, pricing, and allocation—and address market irregularities such as excessively high offering prices, over-subscription at inflated prices, and concerted efforts to drive down prices. Strictly tighten oversight of information disclosure related to fundraising and investment projects. Regulate and guide the healthy development of capital in accordance with the law, strengthen穿透式 (penetrative) regulation and regulatory coordination, and severely crack down on illegal practices such as nominee shareholding, sudden equity investments at abnormal prices, and transfer of benefits.

III. Strict Ongoing Supervision of Listed Companies

Strengthen information disclosure and corporate governance oversight. Build a comprehensive prevention and punishment system for combating fraud in the capital market, and rigorously address illegal and non-compliant activities in key areas such as financial fraud and misappropriation of funds. Urge listed companies to improve their internal control systems. Effectively leverage the supervisory role of independent directors and strengthen safeguards and constraints on their performance of duties.

Comprehensively refine the regulatory framework for share reductions. Introduce management measures for share reductions by listed companies, adopting differentiated approaches tailored to different types of shareholders. Strictly regulate share reductions by major shareholders—especially controlling shareholders and actual controllers—and firmly prevent all forms of circumvention-based reduction practices, guided by the principle that substance takes precedence over form. Order entities found in violation to repurchase the illegally reduced shares and remit the price difference. Severely crack down on all types of illegal share reductions.

Strengthen regulation of cash dividends by listed companies. For companies that have not distributed dividends for many years or have low dividend payout ratios, restrict major shareholders from reducing their holdings and impose risk warnings. Increase incentives for companies with high-quality dividend records and adopt multiple measures to boost dividend yields. Enhance the stability, sustainability, and predictability of dividend payments, and encourage frequent dividend distributions—such as multiple dividends per year, advance dividends, and dividends paid before the Spring Festival.

Promote listed companies to enhance their investment value. Develop guidelines for managing the market capitalization of listed companies. Study incorporating market-capitalization management into both internal and external performance evaluation systems for enterprises. Guide listed companies to legally cancel shares after repurchasing them. Encourage listed companies to focus on their core businesses and comprehensively leverage methods such as mergers and acquisitions, restructuring, and equity incentives to improve development quality. Strictly crack down, in accordance with the law, on illegal and non-compliant activities—including market manipulation and insider trading—carried out under the guise of market-capitalization management.

IV. Strengthen the supervision of delisting.

Deepen the reform of the delisting system and accelerate the establishment of a normalized delisting framework characterized by thorough and timely delistings. Further tighten the standards for mandatory delisting. Establish and improve a differentiated delisting standard system tailored to different market segments. Scientifically define the scope of application for delisting due to major violations. Stricter financial-based delisting indicators should be implemented. Refine trading-related delisting indicators, such as market capitalization thresholds. Intensify enforcement efforts against delistings triggered by regulatory compliance issues. Further smooth out diversified delisting channels. Improve policy provisions regarding mergers and acquisitions, and encourage leading companies to leverage their core businesses to step up consolidation efforts among listed companies within their respective industrial chains. Further reduce the value of “shell” resources. Strengthen oversight of mergers and acquisitions and restructuring, enhance the relevance of core businesses, rigorously scrutinize the quality of assets injected, intensify regulation on “backdoor listings,” and precisely crack down on all forms of illegal “shell-preserving” practices. Further strengthen delisting supervision. Strictly enforce delisting procedures and severely punish illegal activities—including financial fraud and market manipulation—that deliberately evade delisting requirements. Improve the investor compensation and redress mechanisms throughout the delisting process; controlling shareholders, actual controllers, directors, and senior executives bearing responsibility for major violation-based delistings must compensate investors for their losses in accordance with the law.

V. Strengthen regulation of securities and fund institutions, and promote the industry to return to its core mission and become stronger and more competitive.

Promote high-quality development of securities and fund institutions. Guide industry players to adopt sound business philosophies and strike a proper balance between functional responsibilities and profitability. Strengthen the management of shareholders and business准入 for industry institutions, and refine the qualification requirements and filing systems for senior executives. Enhance regulatory frameworks for key businesses such as derivatives and margin trading. Encourage industry institutions to bolster their investment banking capabilities and wealth management expertise. Support leading institutions in enhancing their core competitiveness through mergers and acquisitions, restructuring, and organizational innovation; and encourage small- and medium-sized institutions to pursue differentiated development and specialized operations.

Actively foster a sound industry culture and investment culture. Improve the remuneration management system for the securities and fund industry to ensure it aligns with operational performance, business nature, level of contribution, compliance and risk control, and socio-cultural factors. Continuously carry out comprehensive governance of industry culture, establish and refine a categorized list system for practitioners and a mechanism for managing professional reputations, and firmly address unhealthy trends such as materialism, extravagance and hedonism, short-sightedness and quick gains, and “showing off wealth.”

6. Strengthen transaction supervision and enhance the intrinsic stability of the capital market.

Promote the stable operation of the market. Strengthen comprehensive risk assessments in the stock market. Enhance the building of strategic reserve forces and stabilization mechanisms. Focus on addressing prominent risks and hidden dangers in the private equity fund sector. Improve the market-oriented, rule-of-law-based, and diversified mechanisms for handling bond default risks, and firmly crack down on debt evasion and avoidance behaviors. Explore futures regulatory systems and business models that are suited to China’s stage of development. Effectively monitor and respond to cross-market, cross-industry, and cross-border risks.

Strengthen transaction supervision. Improve regulatory standards for abnormal trading and market manipulation. Issue regulations governing algorithmic trading and enhance oversight of high-frequency quantitative trading. Develop operational rules for private securities funds. Reinforce bottom-line thinking and refine response measures for extreme scenarios. Severely investigate and punish illegal and non-compliant activities such as market manipulation and malicious short-selling, and strengthen deterrent and warning effects.

Improve the expectation management mechanism. Incorporate assessments of the impact of major economic and non-economic policies on capital markets into the framework for evaluating the consistency of macroeconomic policy orientations, and establish a coordination mechanism for the release of information on major policies.

7. Vigorously promote the entry of medium- and long-term funds into the market and continuously strengthen the forces of long-term investment.

Establish a market ecosystem that fosters long-term investment, refine the foundational institutional framework to better align with long-term investment needs, and build a policy system that supports “long-term capital for long-term investments.” Vigorously develop equity-oriented public mutual funds and significantly increase the proportion of equity funds. Establish an expedited approval channel for exchange-traded open-end index funds (ETFs) to accelerate the development of indexed investing. Comprehensively strengthen fund companies’ investment research capabilities, enrich the range of investable asset classes and portfolio options available to public funds, and shift from a scale-oriented approach to one focused on investor returns. Steadily reduce the overall fee rates in the public fund industry and study ways to standardize the remuneration systems for fund managers. Revise the classification and evaluation system for fund managers, and urge them to firmly embrace the principles of rational investing, value investing, and long-term investing. Support the steady development of private securities investment funds and private asset management businesses, and enhance the stability of investment practices.

Optimize the policy environment for equity investments of insurance funds, implement and refine performance evaluation methods for state-owned insurance companies, and further encourage long-term equity investments. Improve the regulatory framework for equity investments by insurance funds and optimize information disclosure requirements for listed insurance companies. Refine investment policies for the National Council for Social Security Fund and the Basic Pension Insurance Fund. Enhance the flexibility of corporate annuity and individual pension fund investments. Encourage bank wealth management products and trust funds to actively participate in the capital market and increase the scale of equity investments.

8. Further comprehensively deepen reform and opening-up to better serve high-quality development.

We will focus on making solid progress in five key areas: science and technology finance, green finance, inclusive finance, pension finance, and digital finance. We will deepen and effectively implement the stock issuance registration system, enhance the institutional competitiveness of the capital market, and increase its inclusiveness toward new industries, new business models, and new technologies. This will better support the implementation of national strategies such as technological innovation, green development, and state-owned enterprise reform, as well as the growth and strengthening of small and medium-sized enterprises and private businesses, thereby promoting the development of a new quality of productivity. We will intensify financial support—both equity and debt—for enterprises that align with national industrial policies and have achieved breakthroughs in critical core technologies. We will step up efforts to reform mergers and acquisitions (M&A) and restructuring, adopting multiple measures to invigorate the M&A and restructuring market. We will also improve and refine the sustainable information disclosure system for listed companies.

Improve the multi-tiered capital market system. Adhere to the differentiated development of the main board, the STAR Market, the ChiNext Board, and the Beijing Stock Exchange; deepen reform of the New Third Board; and promote the standardized development of regional equity markets. Further smooth the “fundraising-investment-management-exit” cycle, and fully leverage the role of venture capital and private equity investment in supporting technological innovation. Promote high-quality development of the bond and real estate investment trust (REITs) markets. Steadily and orderly develop the futures and derivatives markets.

We must uphold the coordinated approach of high-level, institutionalized opening-up and security in the capital market. We should expand and optimize mechanisms for cross-border interconnectivity in the capital market. We will broaden channels for enterprises to raise funds through overseas listings and enhance the quality and efficiency of overseas listing filing management. We will strengthen capacity building for regulation under open conditions and deepen international cooperation in securities regulation.

9. Promote the formation of a synergistic effort to foster high-quality development of the capital market.

Promote the strengthening of the rule of law in the capital market and substantially increase the costs of illegal and non-compliant behavior. Push for revisions to the Securities Investment Fund Law. Issue regulations on the supervision and administration of listed companies, revise the regulations on the supervision and administration of securities companies, accelerate the drafting of regulations on the administration of corporate bonds, and study and formulate regulations on the management of real estate investment trust funds. Promote the issuance of judicial interpretations on the crime of breaching trust and harming the interests of listed companies, judicial interpretations on civil compensation for insider trading and market manipulation, as well as judicial documents aimed at cracking down on criminal acts such as misappropriation of private equity fund assets and breach of fiduciary duty in the handling of entrusted property.

Step up joint efforts to crack down on securities and futures-related illegal and criminal activities. Improve mechanisms for identifying leads and providing rewards for reporting such activities. Enhance the institutional framework for securities enforcement and judicial proceedings, and boost the efficiency of coordination between administrative and criminal law enforcement. Strengthen high-efficiency collaboration among administrative supervision, administrative adjudication, and administrative prosecution. Intensify multi-dimensional accountability—administrative, civil, and criminal—and strictly punish all types of illegal and non-compliant behaviors in accordance with the law. Increase the application of the special representative litigation system for securities disputes and refine the administrative enforcement commitment system. Explore piloting the initiation of civil public interest lawsuits by procuratorial organs in securities cases. Further strengthen the building of an integrity-based system in the capital market.

Deepen coordination and collaboration between the central and local governments as well as among different government departments. Strengthen macro-policy synergy to promote high-quality development of the real economy and industries, thereby creating a favorable environment for the healthy development of the capital market. Implement and refine tax policies related to equity incentives for listed companies, medium- and long-term funding, private equity and venture capital funds, and real estate investment trusts, thus establishing a sound fiscal and taxation system that fosters the formation of innovative capital and invigorates the market. Establish mechanisms for sharing regulatory data and information between the central and local governments and across different departments. Reinforce the responsibilities of local governments in enhancing the quality of listed companies and in addressing and resolving bond defaults and risks associated with private equity firms.

We will build a robust regulatory team that is politically strong, highly competent, and characterized by an impeccable work ethic. We will place political development in an even more prominent position, deepen the comprehensive and strict governance of the Party, and forge a high-quality, professional cadre and talent pool for the capital market—ones that are loyal, clean, and capable of shouldering responsibilities. We will resolutely refute erroneous notions such as “exceptionalism,” “elitism,” and “special status.” We will rigorously and strictly improve the management of former personnel, tackling issues like “shadow shareholders,” improper equity investments, the “revolving door” between government and business, and “escape-style resignations.” We will eliminate the soil and conditions that give rise to corruption, firmly punish corruption intertwined with risks and collusion between capital and power, and create a political environment marked by integrity and transparency.

State Council

April 4, 2024