China Issues New National Guidance to Tackle Stock Market Volatility
China has introduced new national guidance aimed at addressing stock market volatility by tightening oversight of new stock issuances. The State Council of China announced on Friday that the evaluation criteria for companies wanting to list in China will be stricter, with a requirement for companies to disclose their dividend policies.
Additionally, the Chinese government will enhance supervision of listed companies by restricting major shareholders from reducing their holdings in companies that have not paid dividends for many years or have a low dividend ratio. This move comes as China faces challenges such as slowing economic growth, a struggling real estate sector, and weakened consumer confidence, leading to foreign capital outflows and a decline in domestic stock markets.
The CSI 300 index, China’s benchmark stock index, has experienced an 11% drop in 2023 and a mere 1.3% increase this year. In response to these challenges, Wu Qing, the newly appointed chairman of the China Securities Regulatory Commission, held meetings in February with various market participants, including investors, foreign-funded institutions, and private equity firms, to gather opinions on policies to support the long-term development of China’s capital market.
The new measures are part of China’s efforts to stabilize its stock market and attract investment amidst economic uncertainties. The government hopes that these steps will help build confidence in the market and support sustainable growth in the long run.