A Study On The Exercise Of Securities Regulatory Power In China

Finance is the core of modern economy, while securities market, as an important component of modern finance market, is the core of modern capital market. Economists debated over the necessity of market monitoring. However, with the development of market economy, people found that in pursuit of high efficiency, each market would fail to reach optimized allocation of social resources due to market failure caused by monopoly, external economy, public good, information failure and unequal distribution. Securities market may also fail as it cannot solve problems itself, which justifies government intervention and management in this process. As a latecomer, China’s stock market is not free from problems in the legal status, function orientation and enforcement mechanism of supervisors. Power rent-seeking, monitoring cost, information failure and absence of incentive and binding mechanisms on the part of interested groups resulted in inefficient monitoring. In using theories of externality, public good, information failure and securities market’s speculation characteristics, this thesis discusses the uniqueness and necessity of securities supervision in China, analyzes existing problems and offers food for thought in terms of improvement.The initial conclusion is that China’s securities monitoring is administrative intervention for dealing with securities market failure; in line with laws of market operation, securities market should exercise necessary monitoring but not replace market economy. Therefore, while fully respecting market development laws, government should rationalize the relationship between monitoring and market development. On the one hand, as the manager of securities market, China Securities Regulatory Commission(CSRC) should be independent, neutral and authoritative in institutions’ missions and functions. On the other hand, CSRC should limit its range of power execution and avoid excess monitoring. While respecting the market mechanisms, securities monitoring departments should rationalize the relationship between government and market, monitoring departments and other departments as well as monitoring departments and those being monitored. An independent and authoritative monitoring body has to be built, so as to optimize enforcement mechanism, establish incentive and binding mechanism, increase efficiency, compensate and optimize for the securities market failure and realize optimal allocation of social resources.