China's stock market capitalization topped its gross domestic
product (GDP) for the first time last week.
The explosive growth of the domestic stock market has different
implications for investors and companies. Yet, for the securities
authorities, it means an urgent call for more effective
regulation.
Market data showed that the overall value of Chinese shares
surpassed the 21 trillion yuan ($2.77 trillion) of GDP last year
when the benchmark Shanghai Composite Index hit a fresh high on
Thursday.
The sheer size of the stock market tells a lot of its increasing
importance to the economy. By including more and more large
companies, it is able to serve as a more accurate barometer.
The speed of the market's expansion in recent years is even more
impressive. Two years ago, the total value of Chinese shares was 3
trillion yuan. But now, with more large-cap State-owned companies
to be listed later this year, the market capitalization will rise
by a considerable margin, even after exceeding the country's
GDP.
For investors, an expanded market means they will have more
investment choices. For companies, the increased depth of the stock
market will provide them with more fundraising opportunities.
However, for the market regulators, the rapid expansion of market
capitalization calls for doubled efforts to check various
irregularities and protect the interests of public investors.
On the one hand, the fast expansion of the market is based on an
unprecedented stock boom, which has typically given rise to various
market malpractices. The China Securities Regulatory Commission
said last month that in the first half of the year, it had fined 16
listed companies and two brokerage firms, warned 134 individuals
and banned 46 people from entering the stock market. Increasingly
rampant speculative activities have contributed to the stock market
frenzy that is fueling unsustainable bubbles.
To maintain investors' confidence in the market's long-term
development, the market watchdog should tighten supervision to
prevent such wrongdoings.
On the other hand, the increased size of the stock market also
indicates it will exert a greater impact on the economy. Thus, to
ensure the sound development of the stock market, the securities
authorities must ensure transparency and fairness while heightening
vigilance against any possible wrongdoers.
(China Daily August 13, 2007)
