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Messages in Terms of Business Structure

In recent years, the Chinese securities industry has been moving closer to international standards in terms of market structure, trading tools, and investor makeup. With the launch of new boards and an international board in the future, the Chinese capital market is developing a multilayer structure. It consists of the main boards, Shanghai and Shenzhen Stock Exchanges, the Small-Medium Enterprise (SME) Board, the growth enterprise board, ChiNext, and a national over-the-counter (OTC) equities market, the National Equities Exchange and Quotations (NEEQ). In terms of trading instruments, a diversified financial product structure has taken form consisting of stocks, bonds, futures, stock index futures, and securities margin trading. In terms of investors, an investor structure with multidimensional demand has taken shape, consisting of public offering funds, privately offered funds, social security funds, QFII, QDII, overseas investors (targeting those investing in Chinese shares listed in overseas markets), high-end individual investors, and retail investors. In terms of securities intermediaries, an environment has been created in which Chinese securities traders and large international investment banks coexist. Favorable conditions are in place for Chinese securities companies to grow. Learning from the experience and lessons of large international investment banks helps to carve a special path for Chinese securities companies to grow bigger and stronger. Specific areas for improvement are examined next.

Raise the Capital Scale of Securities Companies

Although the number of securities companies is large, most have a small capital scale and lack competitive strength. Therefore, we should raise the capital scale of securities companies based on overseas development experience. The capital scale of securities companies can be raised in the following three ways:

1. Going public after restructuring: Going public allows securities companies to get the funds they need for development, on the one hand, and carrying out restructuring through acquisitions with the help of the capital market, on the other. Therefore, in the restructuring stage, new equity funds should be introduced. The company can go public for financing when a proper corporate legal person governance structure has been established.

2. Mergers: Cross-regional cooperation may be carried out to form alliances in capital and technology markets. This will realize resources and business consolidation and give rise to large regional securities companies.

3. Developing financial groups: A financial group is a union of enterprises engaged mainly in the financial sector. It has a complete internal organization and management framework, implementing a group operation model consisting of separate operation and mixed management. It is usually controlled by a holding company. The business of the group is allocated among various subsidiaries. Currently, international financial holding companies are normally integrated financial groups such as CITIC and Everbright.

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