| Since the second half of 1999, and especially after year 2000, the primary stock market in China has undergone a profound change, which is highlighted by the continuous innovations in share issuing system. These innovations, especially means of share issuing, the milestone publication of The Verification Procedures of Shares Issuance, and later the experiment of some new pricing mechanism in share issuance, all reflect the dawning of a great reform in China's share issuing system. On March 17, 2001, the Verified System came into effect. It brings forward various pressing challenges such as the position and role of government (the securities regulatory authority) in share issuance, the relationship between the government and market participants-stock exchanges, issuers, investment banks (underwriters) and investors. Those challenges also include how to end the current split between the primary market and the secondary market in China; how investment banks evaluate companies on a reasonable basis and then make decisions on pricing, marketing and risk management; how issuers adapt to the new regulations and choose investment banks; how investors choose investment strategies in the face of various unfamiliar approaches of shares issuance. The change from Executive Approval System to Verified System is an extraordinary progress itself. In the span of change, year 2000 is marked by the most new regulations effected. It is also marked by continuous experiment in share issuing means and pricing mechanism. Such experiments have resulted in both successes and failures, nevertheless both success and failure could enrich our experience at this particular moment when Verified System just went into effect, and suggest suitable system of share issuance for China's stock market, thus contribute to the stable and long-term development of security market. There lies the beginning point and significance of the study in this paper. Analysis in this paper follows the clues and notion below:First, the share issuing system consists of two parts, which includes three subsystems with regard to government's intervention in the market economy. Part One is the share issuing administration system that specifies government's role and position in share issuance; Part Two is the means of share issuing and the pricing mechanism that reflects the competition between various market participants (issuers, investment banks and investors). Second, within the framework of 'domestic-international-domestic', the paper follows two clues. One is primarily focused on domestic study, which is covered in Chapter One. It gives a brief historical review of China's share issuing system so as to reveal the characteristics, defects and drawbacks of the present share issuing system. The other clue adopts horizontal analysis which, after study of the current share issuing system on international security markets, attempts to suggest ways of improvement and innovations for China's system relevant to the current defects and flaws. Third, the overall structure of this paper is to put forward innovations after analyzing the domestic practice and the international ones. Chapter One presents the characteristics and the origin of the regulatory system, the means of issuing and the pricing mechanism of China Stock Market. And then summarizes their defects and drawbacks, which is one of the basis for innovations. Chapter Two to Four have similar structures. The first section, as the second basis for innovations introduces the international systems of share issuance administration, means of issuing and pricing mechanism. The second section explores possible innovations based upon the corresponding defects discussed in Section 1. The content of the paper is as follows:From a historical perspective, Chapter One analyses the origin, the characteristics and the flaws of share issuing system. The Verified System is essentially a two-tier administrative executive approval system; The means of share issuance is single; The present pricing mec... |
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