China must accelerate reform measures to reinforce the stable and healthy development of the capital market in the coming five years as a strategic pivot in transforming the country's economic growth model, said leading economists and financial experts.
Despite Thursday's market correction, they said the recent rally in Chinese equities, together with the ongoing regulatory initiatives to enhance market stability, still highlights a strategic shift toward positioning the capital market as a central driver of innovation, consumption and domestic economic circulation amid external headwinds.
Looking at the new round of capital market reform to be unfolded in the 15th Five-Year Plan (2026-30) period, top priorities should include firmer determination to close regulatory loopholes that leave room for improper profits, ensure market fairness for retail investors, and improve transparency for global investors, they added.
Proposals for formulating the 15th Five-Year Plan for national economic and social development will be studied at the fourth plenary session of the 20th Communist Party of China Central Committee, scheduled to be held in Beijing in October.
Xi Jinping, general secretary of the Communist Party of China Central Committee, called for giving full play to the pivotal role of the capital market at the Central Financial Work Conference in 2023.
At the CPC Central Committee Political Bureau meeting on July 30, which Xi chaired, it was pointed out that the attractiveness and inclusiveness of the domestic capital market should be boosted, in order to consolidate the improving and stabilizing trend of the capital market.
"The ongoing rise of A shares reflects that the strategic position of the capital market in China's economic agenda is rising significantly," said Tian Xuan, president of Tsinghua University's National Institute of Financial Research and associate dean of Tsinghua University's PBC School of Finance.
In the upcoming 15th Five-Year Plan period, high-quality development of the capital market will act not only as a key pathway to address structural economic issues, but also as the "central pivot" for transforming the country's growth model, Tian said.
The bottlenecks faced by traditional growth drivers, the remaining financing difficulties for innovation and intensified global tech competition all demand steady, healthy growth of the capital market to guide long-term capital into core technologies, Tian said. The growing household demand for wealth management also requires the capital market to provide diverse investment channels, he said.
He added that China should further improve fundamental institutions to ensure sustainable market momentum, calling for better management of expectations, greater policy transparency and timely, positive signals to shore up sentiment, as well as stricter information disclosure and an improved delisting mechanism to raise listed companies' quality.
China's A-share market fell on Thursday, as experts cited profit-taking pressure, while the United States Federal Reserve's 25-basis-point interest rate cut on Wednesday fell short of some investors' expectations for a bolder move.
Despite a 1.15 percent drop on Thursday, the benchmark Shanghai Composite Index has risen by nearly a quarter from the April trough, closing at 3,831.66 points. US investment bank Goldman Sachs said in a report on Thursday that it forecasts an 8 percent upside for the A-share market over the coming 12 months.
Liu Jipeng, a senior expert on capital markets and a professor at the Business School of China University of Political Science and Law, said that further closing regulatory gaps to safeguard market fairness and investor interest would hold the key to future capital market reforms and steady market growth.
"A slow bull market has taken shape. The goal should be making it steady and long-lasting, so that the capital market can serve as a platform for common prosperity, where the majority of investors can share returns, rather than only a few getting rich overnight," Liu said.
Wu Qing, chairman of the China Securities Regulatory Commission, pledged at a recent symposium to accelerate the new round of capital market reform and opening-up to consolidate the improving market trend, stressing that the market is at a crucial stage in its pursuit of high-quality development in the 15th Five-Year Plan period.
China has ramped up capital market reform efforts after it released a high-level guideline in April last year, rolling out nine measures to promote the high-quality development of the capital market.
Since then, the country has issued new rules and measures to better regulate holding reductions by major shareholders, raise the dividends for equity shareholders, and encourage the entry of long-term capital while improving mechanisms to anchor market liquidity amid slumps.
Liu attributed the recent rally to such reform measures, and said that more must be done to further enhance market fairness, including in areas such as stock issuance review and pricing, quantitative trading and large shareholders' stakes.
Luo Zhiheng, chief economist at Yuekai Securities, said that enforcing rules with greater rigor and raising penalties for fraudulent practices are essential to building lasting investor trust.
With the A-share market showing an improving and stabilizing trend, Luo said it can lift household income and offset part of the drag from the housing slowdown, and make people more confident to spend, thus supporting consumption and overall economic vitality.
The A-share rally has also enhanced the attractiveness of Chinese financial markets globally.
Thomas Fang, head of China global markets at investment bank UBS, said that global investors are showing greater interest in Chinese financial assets as the country's shining economic prospects help them to diversify their allocations from US dollar-denominated assets.
Fang applauded China's recent opening-up policies that offer global investors more instruments to invest in China, facilitating their risk management and helping them take bigger positions in the country.
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