Economist: Healthy capital market critical

China can adopt more measures like adjusting share trading transaction settlement times, strengthening regulations and improving the quality of listed companies in order to boost investor confidence and safeguard the healthy development of the capital market, said a senior economist.

Such moves will eventually help nurture the country's technological advancement and drive high-quality economic growth, Tian Xuan, vice-dean of Tsinghua University's PBC School of Finance, said in an exclusive interview with China Daily.

Tian, who is also a deputy to the 14th National People's Congress, plans to suggest at the upcoming two sessions that China gradually replace the current "T+1" stock trade rule with the "T+0" settlement circle. The two sessions are the annual sittings of the nation's top legislature and top political advisory body, which will be held in the first half of March.

With the "T+1" settlement arrangement, transactions are settled on the next business day following the date of the original transaction, thus aiming to prohibit traders from selling shares they have bought on the same day to ensure stable functioning of the stock market.

Yet, Tian said, in reality it only prohibits individual traders from doing so, because large and institutional investors can resort to quite a few tools that are not available to individual investors — including stock index futures — to take countermeasures.

"If we adopt the 'T+0' rule, retail stock market investors can be more active, and market liquidity will increase," he said.

Yet, to ensure high-quality development of China's stock market, the most important thing is improving listing and delisting processes while enhancing corporate governance of Chinese companies in order to ensure the high quality of listed companies and reasonable returns on investments, thereby boosting the vitality of the capital market, he said.

Tian also urged tougher regulations and heavier punishments for stock issuers — and agencies like brokers, accounting firms and law firms — for activities such as fraudulent share issuances, financial management misdeeds, insider trading and other market manipulations, to better protect investors' rights and interests.

Apart from holding relevant market entities and institutions more accountable, it is equally important to hold responsible key individuals for such illegal behaviors and expose them to heavy punishments when warranted to serve as disincentives to others, he added.

While dismissing some pessimistic views on the Chinese economy propagated by Western media, Tian said it is normal for any large economy to not always maintain high-speed growth — such as China has achieved over the past decades.

He predicts the 2024 GDP target, to be announced during the two sessions, and the final growth rate of the country, will be around 5 percent, indicating better economic performance this year compared to last year, given the low base rate in 2022.

Now that China has entered a new phase of high-quality development, the country is expected to deepen reforms to seek greater economic and industrial upgrades, Tian said.

Looking ahead, he highlighted the necessity of managing the relationship between the growth of new and traditional economic drivers during the process of economic structural transformation, as the tone-setting annual Central Economic Work Conference in December called for efforts to "establish the new before abolishing the old".

Tian cautioned against rashly pursuing new drivers at the expense of causing oversupply or excess capacity, saying some traditional sectors still enjoy growth potential and space for upgrading and transformation. More efforts should be made to drive the upgrade of some traditional sectors and foster new productive forces, he said.

Discussing the draft Government Work Report on Thursday, a meeting of the Political Bureau of the Communist Party of China Central Committee said this year's work must follow the principles of pursuing progress while ensuring stability, consolidating stability through progress, and establishing the new before abolishing the old.

The draft government work report will be submitted to the top legislature's annual session in March for deliberation.

Tian also highlighted the importance of supporting the development of the private sector, saying it serves as a fundamental driving force for bolstering economic growth.

Private firms, a key driving force behind China's economic ascent during the past decades, contribute more than 50 percent of the country's tax revenue, 60 percent of gross domestic product, 70 percent of technological innovation, 80 percent of urban employment and 90 percent of market entities, official data showed.

According to a recent joint legislative work symposium held by the Ministry of Justice, the National Development and Reform Commission and the Legislative Affairs Commission of the Standing Committee of the National People's Congress, work has begun on drafting a law promoting the private economy, and the legislative process will be accelerated.

Tian said the latest legislative efforts aim to provide a solid legal framework for bolstering the private sector beyond mere policy support, which will significantly boost business confidence. "It should be prioritized in the legislative agenda for 2024."

Despite the central government's steadfast support, Tian said challenges persist, exacerbated by global uncertainties and the prolonged impact of the COVID-19 pandemic.

Contact the writers at liuzhihua@chinadaily.com.cn