Speakers:
Guo Shuqing, chairman of China Banking Regulatory Commission (CBRC),
Wang Zhaoxing, CBRC vice chairman,
Cao Yu, CBRC vice chairman,
Yang Jiacai, assistant to CBRC chairman

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
March 2, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. Welcome to our press conference. In the past few weeks, we have invited the heads of many government departments to brief you on China’s economic and social development.

Today, we have Mr. Guo Shuqing, who has just taken up his post as chairman of the China Banking Regulatory Commission (CBRC). He will explain how the banking industry is supporting supply-side structural reform, and then take your questions. We have also with us the two CBRC vice chairmen, Mr. Wang Zhaoxing and Cao Yu, and the CBRC chairman’s assistant, Mr. Yang Jiacai.

Guo Shuqing:

First, please allow me to make a general introduction of the banking industry’s reform, development and surveillance works. Later, I’ll take your questions.

In 2016, the banking industry completed all its tasks of the year and ensured a good beginning for the implementation of the 13th Five-Year Plan (2016-2020).

By the end of 2016, the Renminbi and foreign currency assets of Chinese banking sector reached 232.25 trillion yuan, up 15.8 percent year-on-year. The growth rate was 0.13 percentage points higher than the previous year. The balance of deposits and loans increased in a stable way. At the end of the year, the balance of Renminbi and foreign currency loans totaled 112.06 trillion yuan, increasing12.7 trillion yuan, or 12.79 percent, from the beginning of the year. The balance of Renminbi and foreign currency deposits was 155.52 trillion yuan, a gain of 15.74 trillion yuan, or 11.27 percent. Asset quality remained stable. The non-performing loan rate was 1.91 percent, down 0.02 percentage points on the year; net profits of the banking industry exceeded 2 trillion yuan. Regarding commercial banks, the non-performing loan rate was 1.74 percent, up 0.07 percentage points; net profits totaled 1.65 trillion yuan, up 3.54 percent; the average return on the asset and capital ratios remained basically unchanged, registered at 0.98 percent and 13.38 percent respectively. The banking industry is now better prepared to handle risk. The loan loss reserve, the non-performing loan provision coverage ratio, the non-performing loan provision ratio and the capital adequacy ratio of commercial banks remained basically unchanged at 2.67 trillion yuan, 176.4 percent, 3.08 percent and 13.28 percent respectively. Generally, the systemic risks of the banking sector remained under control.

This year, we will fully implement the guiding principles of the Central Economic Work Conference. Specifically, we will carry out four tasks.

First, we will be more active in supporting and implementing supply-side structural reform.

Regarding market-based debt-for-equity swaps, currently, the total value of such contracts has exceeded 430 billion yuan. The value of contracts implemented surpassed 40 billion yuan. In the next stage, we will increase policy support, enhance professional guidance and strengthen risk monitoring to promote further progress.

We will remain active but prudent in regard to the trial program to allow commercial banks to participate in combined debt-equity investments into startups and small businesses.Based on the special national conditions, we will explore new financial service modes for technological innovation companies. We will also support trial banks to diversify their service modes according to their internal conditions.

The banking sector will play a more active part in supporting supply-side structural reform of the agricultural sector. More loans will be given to rural areas, farmers and small and micro-sized enterprises. The efficiency of targeted poverty alleviation and financial inclusion will be improved. Weak links of financial services will be fixed.

Second, we will further improve service to real economy. We will continue to improve banking services and tackle the bureaucratic work style of some banks.

Third, we will take firm actions to stop illegal financial practices. According to the requirements of the Central Economic Work Conference, we will attach greater importance to risk control and prevent all kinds of systemic financial risks. Currently, cross-market financial products have become a major problem due to their complicated and unpredictable nature. The emergence of such products should be blamed on lack of an appropriate regulatory mechanism. Without a well-established mechanism, the banking industry will be exposed to grave risks. Therefore, we must review existing regulations, make new ones where necessary, revise outdated ones and abolish those that are deemed unsuitable.

Fourth, we will comprehensively improve banking personnel’s quality. One has to be very strong to strike iron. It’s the job for the banking industry to handle various risks, and it’s the CBRC’s duty to monitor management risk. We must increase the awareness of risks and always be ready to deal with worst-case scenarios. Only in this way can we fulfill our duty as a regulator.

That’s all I want to say. Thank you.

Hu Kaihong:

Thank you, Mr. Guo. Now, the floor is open to questions. Please identify your media outlet before raising questions.

Phoenix TV:

I have a question about mixed business regulations. We noted that recently the PBOC, together with the CBRC, the China Securities Regulatory Commission (CSRC) and the China Insurance Regulatory Commission (CIRC), is working on a guiding opinion about unified regulation. In your view, what is the biggest challenge in achieving this unified regulation? Is there any plan from the CBRC concerning the mixed regulations this year?

Guo Shuqing:

Your questions really hit the key point. “Shadow banking,” regulatory arbitrage, passageway business and lengthy supervision chain, all these issues have received much attention. At present, different financial institutions, such as commercial banks, trust companies, fund companies, securities companies and insurance companies, have carried out their own asset management activities, following different regulations and rules. This has resulted in disorders and made more capital flow to the virtual economy. So, we are working on a common regulation. I have to say I don’t know much about the progress, because this is my third day in office. As far as I am concerned, we will make a unified regulation based on the most basic standards. These standards should be achievable and observed by all parties concerned. On this basis, each institution and industry can implement their respective standards. In this way, we can increase the transparency of asset management products, curtail supervision chains and tighten supervision of shadow banking. Furthermore, we can reduce the amount of capital disguised in other forms and make it more transparent. I’d like to invite my colleague to explain further.

Cao Yu:

Asset management business, or wealth investment business, in the banking industry has played a positive role in such aspects as deepening financial market reform, promoting real economy growth, increasing citizens' property incomes and advancing transformation of banks. By the end of last year, the book balance of wealth investment funds reached 30 trillion yuan nationwide and such products generated revenue of 977.3 billion yuan.

The CBRC has paid much attention to wealth investment business. We will further improve the regulation formulation in this regard to strengthen supervision. The new regulation, which has attracted much concern, has been under revision for a long time. Based on existing regulations, we are working on a new management method targeting emerging problems so as to advance the transformation of wealth investment business in an orderly manner. The management method is almost mature. As for the supervision on big asset management business, the PBOC has joined hands with the CBRC, CSRC and CIRC to formulate a unified regulation on asset management products. It is going smoothly. The CBRC will actively cooperate with the PBOC and other agencies.

Reuters:

My question is also about risk. We have noted the rapid expansion of non-loan assets on bank balance sheets over the last five years, and particularly joint start-ups and city banks. In some cases, these non-loan assets surpass loan asset on bank balance sheets. How is the CBRC moving to control risks in the financial system? Can we expect the growth of these assets to diminish?

Guo Shuqing:

We’ll categorize them based on various conditions, drawing conclusions by taking into consideration the differences of banks and products. However, generally speaking, we follow the fundamental principle of scrutinizing those assets that appear on the balance sheet. I’ll ask my colleague to provide more details.

Wang Zhaoxing:

In recent years, in line with market-centered financial evolution, market- oriented reform of interest rates has progressed, and comprehensive development of banking businesses is underway. They have actually brought about two major changes: rapid growth of non-credit assets that, in fact, have come to outweigh credit assets and the expansion of off-balance sheet businesses that end up outperforming those on the balance sheet. They have emerged as a result of the increasing driving force coming from the market, as well as the deregulation of interest rates. There are also supervisory bodies attempting to decentralize banking risk by encouraging multiple bank assets and debts as well as diversified profit revenues.

Besides, the role of the market has been increasingly accentuated; this, entails the growth of bank extra-services and market-oriented and intermediary businesses. We treat them differently as they are not entirely negative compared to those involved in schemes shunning supervision, getting involved in arbitrage and circulating banking loans inside the financial system rather than handling them in the real economy.

Moreover, we in no way seek to oppose and interrupt the diverse developments of banks, yet we should be increasingly vigilant about possible risks. When doing so, we will first encourage further development of banking credit services either by loans or other approaches to ensure funds are dispensed in support of the real economy. Second, we’ll make sure risks are transparent and controllable. Third, we will secure the sufficiency of reserves and capital in a bid to offset potential dangers. As a result of China’s financial progress, market development and emergence of multiple banking services, those businesses cannot be simply described as right or wrong. However, at the same time, we will observe the issue from the three aspects I mentioned above to improve supervision and regulation. Thank you.

CCTV:

Just now, Mr. Guo mentioned that we need to improve the ability of financial services to serve the real economy. Since last year, a lot of debt committees have been established in China. The debt committees are aimed at solving the problems of zombie enterprises and overcapacity. Can you tell us the achievements of debt committees? Are there any further steps to be taken in reforming and innovating the system? Thanks.

Guo Shuqing:

Judging from my work experience, debt committees provide a good method. There are many banks providing loans to enterprises, especially to large and medium size enterprises. Therefore, unanimous action and deployment is welcomed by the local governments and the enterprises when it comes to the issues of enterprise structural adjustment and risk disposal. It is also beneficial for banks as it can prevent fear caused by information asymmetry. Currently, the debt committee is a good method for banks, enterprises, local governments and other stake holders to resolve problems, even serious problems, such as insolvency, bankruptcy liquidation and debt restructuring, because all parties have their resources and can negotiate together. The effect is much better in the process of dealing with zombie enterprises. We will continue to watch and determine future developments.

When I worked in Shandong, the debt committee played a great role in the process of structural adjustment and debt restructuring for a mineral group. More than 40 negotiations were held and a satisfied result was reached by all parties. Therefore, this is a good way to resolve debt issue as all parties can get the best protection for their rights.

Cao Yu:

Until the end of last year, there were 12, 836 debt committees established in China, involving a total credit amount of 14.85 trillion yuan. Through the debt committees, a win-win situation could be reached for banks and enterprises while reducing the negative influence on the daily operation of banks and enterprises brought by unilateral action. Thanks.

Bloomberg News:

My question is about debt-for-equity swaps. Will CBRC encourage more banks to participate? How to address the risk of private capital in participating? Isn’t it just prolonging the life of zombie companies and how can it be resolved? Thanks.

Guo Shuqing:

It has been highlighted that debt-for-equity swaps should follow market rules as well as the laws. Administrative orders and administrative negotiations are not allowed. Zombie enterprises are not allowed to participate in debt-for-equity swaps. We have carried out more than 40 billion yuan worth of swaps with more than 400 billion yuan in agreement. It is a sustainable method. The relevant laws and regulations will be improved during the process. However, our effort is helpful for structural reform on the supply side, especially for de-leveraging. It can also help enterprises get out of difficulties. Thanks.

21st Century Business Herald:

 I have two questions. First, there’s a rumor, Mr. Guo, that you will be in charge of the reform of the regulatory system, for example merger of CBRC, CSRC and CIRC. What can you say about this? Second, there has been a further increase of non-performing loans in the banking industry. What will CBRC do this year to address this issue? Thanks.

Guo Shuqing:

For the first question, the interpreter just now answered on behalf of me as he used the word “rumor” in his translation. As for the second one, it is quite normal to see volatility in non-performing loans at a time when the country’s economy has entered a “new normal” condition, economic growth slows down, economic restructuring intensifies and new economic growth drivers begin to emerge. Of course, the problem this time is worse than before. However, compared to other countries, a rate of 1.91 percent of non-performing loans in the entire banking sector, and 1.74 percent of non-performing loans for commercial banks are actually not too high. We have not included such aspects like overdue loans for more than 90 days and those on the “watch” list in our calculations. They won’t make a big difference to overall asset quality.

Ten years ago, China’s banking industry began equity division reform before getting listed on the stock market. After radical reform, we have established an internal risk control mechanism, a market-oriented management system, a constraint mechanism as well as an external supervision mechanism. These mechanisms are complete. Against the backdrop of a complicated domestic and international situation, there might be some problems, but they are quite understandable, and the overall situation is quite healthy. With strong leadership of the CPC Central Committee with Comrade Xi Jinping as the core, support from all walks of life, especially business circles, media supervision, the unremitting efforts of all banking sector staff and the conscientious devotion of the regulatory body, I’m convinced that any risks and problems can be properly solved. Thank you.

Caijing Magazine:

We know that actually the idea of a unified mix-business regulation framework has been floated for quite some time, and the People’s Bank of China has already set up a macro-potential regulation framework. So in your point of view, what is the most suitable model of regulation for the current development of the financial industry in China? And what kind of role will CBRC play in the future financial reform of the country? Thanks.

Guo Shuqing:

It’s very hard for me to answer your question since it’s only the third day for me to take this new appointment. I haven’t thought over this question yet because during the past four years, I have been working on the real economy. Last week, I was thinking about the industry transformation and upgrading in Shandong Province. For example, last year, 22 industrial transformation schemes have conducted mid-stage assessment; 23 schemes in the service industry are waiting for assessment this year; in agriculture, 46 kinds of products are ready to be assessed.

In 2016, we have completed 530,000 shantytown transformations; this year, 760,000 houses of shantytown transformation have been approved. In rural areas, we have to transform road, power, housing, toilet and other areas. Last year, we planned to transform 2 million toilets; but actually, we have finished 4.01 million. If you asked me what the most suitable model for toilet transformation is, I know it exactly; but if you asked me what the most suitable model of financial regulation is, I know nothing at present. I’m very sorry I can’t answer your question now. Thank you.

Dragon TV:

I have two questions. First is about real estate. Last year, the price of real estate in first- and second-tier cities grew extremely fast. Lots of prime lots appeared, most of which are reliant on bank loans. Mr. Guo, could you give us an introduction about how is the banking sector going to help alleviate the rising of house prices. And what will CBRC do to strengthen loan regulations coordinated with real estate control? Thanks.

Guo Shuqing:

Real estate finance is an important part. Currently, 1/4 of bank loans go to real estate market. Last year, 45 percent of new bank loans went to the real estate market. We are highly alert to a property-value bubble, and will do related research very seriously.

However, the most significant characteristic of the real estate market is the huge difference between different places. Different cities have to face different kinds of property bubble and risks. Therefore, in the financial regulation field, we hope banks will stand on actual reality and invest capital in real estate steadily and cautiously, including both towards individuals and property developers. Several years ago residents used to buy houses using their own deposit or by borrowing money from relatives and friends. In recent years, people like to rely on bank loans to buy houses. Last year, nearly half of the new bank loans were real estate loans, most of which are personal housing mortgage loans. Generally speaking, personal loans are not a huge proportion, and its leverage ratio is not high, but we have to pay close attention to the trend.

Wang Zhaoxing:

China’s real estate market is an emerging market featuring rapid growth, which made great contributions to Chinese economy, fiscal levies, as well as capital and profit growth of Chinese banks. As for real estate credit policy, we insist on a differentiated policy. We will limit those real estate loans containing bubbles and speculation, and destock some loans in third- and forth-tier cities. During the process of urbanization, housing demand especially rigid demand is also the loan demand which could improve people’s housing conditions and needs to be supported. By doing so, it will not only promote the real estate market to develop healthily and steadily, but also assure bank loans are safer.

Shanghai Securities News:

I have two questions. My first question is about the debt-to-equity swap. Is there a target, for example, to make its scale grow to a trillion yuan? In addition, with regards to setting up institutes, have you drawn up some preconditions, or is the CBRC drafting specific regulations? Since the investment-loan linkage and the debt-to-equity are being promoted, will you revise the relevant articles on limiting investment from banks in the Law on Commercial Banks?

My second question is about illegal fundraising. Ezubao and the Fanya Metal Exchange in Kunming drew much public concern, mainly because the incidents happened without prior warning with blurred boundaries in terms of their legality. Did the CBRC ever consider how to solve this problem from an institutional perspective? The CBRC said in the past that it planned to hasten the unveiling of regulations on dealing with illegal fundraising. How is this progressing?

Guo Shuqing:

We answered your first question just now. There’s no preset target. The more than 400 billion yuan (US$) we mentioned was merely the face value of the deals we signed. The swap hasn't been fully completed. We will conduct detailed research about the accommodating regulations and will make them based on laws before piloting them. As for your question concerning illegal fundraising, Yang Jiacai will answer this question.

Yang Jiacai:

The question on illegal fundraising you asked just now did receive much public attention, since it was one of the diehard problems in China's economic and social development. The issue exposes every several years, especially when the economy goes downward. In the past two years, illegal fundraising was flagrant, causing serious harm. However, it's indeed difficult to spot such activities at an early stage. How we could identify them at an early stage when they haven't become full-fledged is a focus of our research.

Entrusted by the State Council, the CBRC heads the national inter-ministerial joint meeting on combating illegal fundraising. Dealing with illegal fundraising isn't the CBRC's statutory duty; we and other members of the joint meeting have come up with many measures.

Illegal fundraising is a process in which love becomes hatred, and the dallied becomes the forsaken. In the preliminary stage, people are bound by common interests, so that few will disclose it, although local governments all encourage such disclosure with incentives. But we didn't see many disclosures. Why? Because they share common interests from the beginning.

We are currently drafting an administrative act, the Regulation on Dealing with Illegal Fundraising. This regulation was drafted by members of the joint meeting and has taken into consideration opinions from all provincial governments as well as from all ministries. We submitted the draft to the Legislative Affairs Office of the State Council last July, which in turn, conducted in-depth research while extensively collecting the opinions of ministries and local governments. The regulation is now being perfected by the Legislative Affairs Office, which is actively seeking its promulgation.

Second, who will be the enforcement agency? Now there's no authorized law enforcement institution for the cracking down on illegal fundraising, so we need such an administrative law enforcement department. Currently, local governments’ handling of illegal fundraising is usually a responsibility by local financial offices.

The office was called the Bureau of Financial Supervision when Guo Shuqing was working in Shandong. Such an agency existed at all levels of government. In each city, there was a vice mayor especially in charge of financial affairs. Therefore, there was fewer illegal fundraising in Shandong than elsewhere.

Another issue is that we should make clear the legal liabilities of the people involved in illegal fundraising. Usually, illegal fundraising involve three subjects, namely, the initiators, the assistants and the participants. It's important to make clear what liabilities these three subjects will take.

For example, if we disclose a cheater and warn you off him, you ignore the warning. In the end, when you break up, you start to call yourself a victim and want to find trouble with the government. This may not make sense. Moreover, we will make clear and standardize the procedure, methods and approaches. The regulation, when it is promulgated, will be of great help in dealing with illegal fundraising. Thank you.

Wang Zhaoxing:

With regards to the debt-to-equity swap, this time it features no set requirement with regard to its scale, goal or progress. Parties involved will take fully independent ways to carry this out, like dating and marriage – completely independent, self-governing and free. The government won’t interfere in the issue, just as there is no arranged marriage.

Guo Shuqing:

Not even a match-making agency.

Wang Zhaoxing: This is a reorganization plan formed by all parties based on negotiation for the best or at least better results.

People's Daily Online:

Last week, the CBRC issued the Guidelines for the Depository Business of Peer-to-Peer Lending Funds, which has drawn widespread attention in the industry. In recent years, supervision of the new internet finance industry has become more and more specific. Could you give us a brief introduction to the next steps of CBRC's supervisory direction and focus? I have another question. Mr. Guo, will you attempt to register or experience an internet finance business in the future, or have you already had such experiences?

Guo Shuqing:

I will answer your second question first while leaving your first one for Mr. Cao. I have never tried internet finance before, and whether I will try it or not in the future depends on circumstances. But, my family members are very familiar with this business and they have tried in this field many times. I think online shopping and new means of payment, such as Yu'E Bao payment, mobile payment, and Quick Response code scanning, are really very helpful to the real economy, but we must guard against the risks resulting from them.

Cao Yu:

It should be said that the essence of internet finance is still finance, and the rules which internet finance abides by are still financial rules.The Guiding Opinions on Promoting the Healthy Development of Internet Finance, issued by 10 ministerial departments including the People's Bank of China in 2015, has clearly stipulated CBRC's responsibility in supervising peer-to-peer (P2P) online lending services. It should be said that, our current supervisory system framework for the P2P online lending service has basically been completed.

Caixin.com:

How would you solve the problems related to Hengfeng Bank's violations of laws and regulations, which have been exposed by a number of media outlets, and other such similar kind of problems? Thank you.

Guo Shuqing:

Speaking of this question, I think it has some relationship with me because I served as governor of Shandong Province where Hengfeng Bank is based. But the relationship is not too close, because the bank is in Yantai City's jurisdiction.The bank's stock ownership is composed of state-owned shares and other dispersed shares, and it is directly supervised by CBRC. Mr. Cao knows well about it, so I would like to invite him to further answer this question.

Cao Yu:

The problems reflected in the public opinions are being checked and tackled by CBRC in conjunction with the Shandong provincial government. If there are any illegal acts to be found, the parties concerned will be severely punished in accordance with the law. Presently, the business in Hengfeng Bank is proceeding stably and orderly.

Guo Shuqing:

I have one point to add. Currently, Hengfeng bank is conducting the shareholding system reform which is aimed at further standardizing and rationalizing all its internal and external structures and relations. As soon as conditions are right, it will be pushed to the capital market for public listing.

China Securities News:

Last year, the investment-lending linkage pilot program was launched. What has been the progress of the pilot program? Is there any plan to approve additional institutions on this program? The second question is about private banks. The private bank program was also launched last year. So far, according to the statistics released by CBRC, the program was running pretty well. This year, some private capital and listed companies have again expressed a desire to set up private banks. So what will be the trend of private bank development this year? Thank you.

Guo Shuqing:

The investment-lending linkage pilot program is in the trial and exploration stage. We should be positive and prudential with regards to the program. So far, there is no detailed plan for it, but a bank has done their capital landing, and they are boosting their progress. I noticed a question from the list, asking if there is no such program in the United States and European countries, or if it is not a mainstream practice and so can it work in China? In my opinion, it is not a major problem. China can have something that the United States doesn't have, such as spicy hotpot. But what we have to pay attention to is the possibility that linking investment and lending will bring more risks, so it's better to combine it with innovation in science and technology.

For the second question, it is a good thing that private capital enters the financial market, and it is necessary for China's economic development. It's especially necessary for the areas that the financial service doesn't cover or fully cover and that have inadequate competition. But there is also a big risk that we have to take notice of. We must adopt some measures to prevent a minority of people or capital from controlling the bank and turning it into a cash machine for connected transactions. Taking public deposits for their own investment will no doubt bring high risks, which may result in serious consequences. We have to prevent this from happening.

Wang Zhaoxing:

We all know that China's current financial pattern is dominated by bank-led indirect finance, which accounts for 90 percent of all indirect finance. Most of the banks are traditional banks, which specialize in traditional credit operations, including liquidity loans and fixed asset loans. They are not familiar with risk identification, judgment, measurement and management on high-tech innovative enterprises, which is a big challenge for banks. Meanwhile, these enterprises feature light assets, with high uncertainties and risks, without any tangible assets for mortgage, so they have also encountered many difficulties in financing.

With this background, we initiated the investment-lending linkage pilot program, making equity investments for start-ups and growing enterprises and supporting them with bank loans later to establish a complete supporting chain. As a brand new exploration, the program also means a lot of risks and challenges for traditional banks. So we encourage pilot projects.

We have selected five cities for pilot projects, including Shanghai, Beijing, Tianjin, Xi'an and Wuhan. A total of 10 banks are involved. In addition to setting up new institutions, we are also preparing negotiations with technology enterprises that may receive equity investments in the future. A project database will be built. Once the subsidiary companies are approved by the State Council, the project will be on the fast track.

Cao Yu:

Now, I’ll briefly introduce our work on private banks. A pilot program on private banks was carried out in 2014 during which we approved five such banks. In 2015, we made systemic preparations and improved various rules. By 2016, we saw normalized and regular operation of private banks. Therefore, we approved the establishment of 12 more last year, three of which have already started business. The operation of private banks last year was generally smooth. By year-end, the total assets of the existing eight private banks reached 180 billion yuan, and their outstanding loans stood at about 80 billion yuan. These banks have already begun serving the needs of society and the overall economy, and the legal and orderly operation of private banks has been achieved. Thank you.

Guo Shuqing:

Thank you all for your attendance, today. You are always welcome to offer your advice and suggestions on our work.

Hu Kaihong:

Today’s press conference ends here. Thank you every one.

Speakers:
Liu Shiyu, chairman of the China Securities Regulatory Commission,
Li Chao, vice chairman of the China Securities Regulatory Commission,
Fang Xinghai, vice chairman of the China Securities Regulatory Commission,
Zhao Zhengping, vice chairman of the China Securities Regulatory Commission

Chairperson:
Hu Kaihong, spokesperson of the State Council Information Office

Date:
Feb. 26, 2017

Hu Kaihong:

Ladies and gentlemen, good morning. China’s capital market has long been watched closely by many people. Today we are delighted to invite to our press conference Mr. Liu Shiyu, chairman of the China Securities Regulatory Commission (CSRC), and Mr. Li Chao, Mr. Fang Xinghai and Mr. Zhao Zhengping, the three vice chairmen of the CSRC. They will introduce to you the work done for the promotion of reform and development in China’s capital market and answer your questions. Mr. Huang Wei and Mr. Xuan Changneng, assistant chairmen of the CSRC, are also here today. Now, please welcome Mr. Liu.

Liu Shiyu:

Thanks every one for coming to the press conference of the CSRC.

In the past year, under the strong leadership of the CPC Central Committee with Comrade Xi Jinping as its core, the CSRC and its related agencies continued to aim for the overall targets of stable growth and structural adjustment while benefitting people’s well-being and avoiding risks, as well as following the country’s supply-side structural reform, in order to carry out the various work relevant to reform and development in China’s capital market. The work can be summarized in three words: stable, strict, and progressing.

The first word is “stable.” Since I began my work at the CSRC, I felt that the market wanted stability more than anything after the turbulences in the stock market during 2015. Our work in the last year delivered on this goal. First is the stable policy expectation. We adhered to market-based, legal and internationalized reform, maintained consistency in our policies and continued with those policies and practices that were welcomed by and proved effective on the market. We also fully respected market rules, met market needs and concentrated on our work. Second, the market ran steadily last year. In 2016, with the effort of investors, the Shanghai and Shenzhen stock markets witnessed fewer fluctuations. Investors grew more optimistic, the market was steadier and the various functions of the market were enhanced. Third, market reform was conducted steadily. We carried out problem-oriented reform, addressed the various problems behind the turbulent market with institutional reform and carried out reform at a steady pace.

The second word is “strict.” In the past year, we managed the market in a rules-based, thorough and strict manner. First, we had strict standards. We had a strict approval standard for IPO, in order to ensure the soundness of listed companies and avoid problems from the very beginning. Second, we had strict practices. We resolutely addressed all the disorders and problems in the capital market. Third, we had strict self-management. We strengthened the Party discipline within the CSRC and its related agencies to enhance our own political awareness and ensure the strict management of ourselves.

The third word is “progressing.” First, bolder reforms were pushed ahead. By upholding a market-based economy, rule of law and globalization, we managed to improve a series of fundamental institutions of capital market through problem-oriented reforms. The National Equities Exchange and Quotations has divided its listed companies into different markets. The legal status and operating rules of regional equity markets have been clarified. The State Council has issued related documents in this respect. We have increased the efficiency of IPO for enterprises from impoverished counties. We have revised major restructuring and refinancing systems for listed companies quickly and made great efforts to improve the regulation rules on securities, funds and futures business institutions. We have given full play to the Stock Exchange’s regulatory functions at the frontline. We have innovated the methods and mechanism for protecting investors’ rights and interests. We have explored and set up a diversified mediation mechanism for securities disputes.

Second, new efforts have been made to support the substantial economy. Last year, 280 enterprises’ IPOs were approved and 248 enterprises completed IPOs. The turnover exceeds 163 billion yuan ($23.7 billion). Here are more figures I’d like to share with you. The listed companies raised over 1.34 trillion yuan after refinancing last year. Mergers and acquisitions of 261 enterprises were approved, increasing the capital strength of listed companies by over 980 billion yuan. NEEQ reporters may notice that the number of the companies listed on the NEEQ system doubled last year, exceeding 10,000 by the end of last year. They financed more than 139.1 billion yuan throughout the year. The bond market has made steady progress thanks to the coordination and support of multiple sectors. Net increase of the funds raised through corporate bonds exceeded 2.7 trillion yuan last year. These funds have supported the growth of the substantial economy.

Third, new achievements have been made in two-way opening. The Shanghai-Hong Kong Stock Connect has been further improved. The Shenzhen-Hong Kong Stock Connect started operation. Securities institutions, as well as stock exchanges involved in the “Belt and Road” initiative, have made remarkable achievements. The CSRC created a closer relationship with international securities regulatory commissions in the cross-border securities regulation and cooperation mechanisms. And the efficiency has been further improved.

The above-mentioned three aspects sum up our work from last year. We offer background materials including statistic data for your reference.

Now, my colleagues and I would like to take your questions.

Hu Kaihong:

Thanks Mr. Liu. Now, the floor is open to questions. Please identify your media outlet before raising questions.

CCTV:

You underscored three keywords in your opening remarks, among which, “stability” is one of the highlights. This is also the word you have used frequently when chairing conferences in regard to the commission’s regular supervisory work. How can we understand what stability implies? How will the CSRC sustain this stability? Will the commission suspend some reforms in order to maintain stability of market operations?

Liu Shiyu:

There is an old Chinese saying that, “The tranquil watercourse is good for a voyage.” The behavior of the capital market in China has more than once justified the belief that no reform can be undertaken without a stable market environment. Moreover, reforms can even be retrogressive if the market is in a volatile state. We have never lacked lessons in this regard. However, if we do not persist in the reform trends of marketization, legalization and internationalization, the problems developing in the medium and long-term in the capital market can neither be reduced nor eradicated. The market will lack both the vitality and a solid foundation secured by stability. Because of this, reform and stability should work together.

I have already introduced to you the work of the CSRC in the past year and my personal view towards reform is that we will progress step-by-step and ensure we are on the correct path and moving in the right direction. The process of reform can be made into a metaphor of the pearl necklaces worn by the ladies present at the conference. There are several elements involved in threading a pearl necklace -- the quality of the pearls, first, and the proper holes to ensure their connection. The holes should be chiseled straight across diameter in a row, as even the most minor deviation will affect the value of the necklace. What do the pearls imply? They are the listed companies of high quality. Second, the thread that has to be smooth and firm refers to the path followed and the operational systems involved in the reforms. Third, the necklace is completed by putting those pearls into a line one by one, as it would never occur to us that a pearl necklace can be completed in one simple move. Fourth, the necklace needs a tapered end to prevent the pearls from falling off and being dispersed, so as to facilitate its use. What does this last element indicate? The monitoring and supervision we carry out. We need good pearls, namely quality listed firms, and a sufficient number of pearls, indicating the number of firms needed to ensured coordinated reforms, stability and development in all respects. To make the necklace look good every time we wear it, we need a firm and enduring thread, which is symbolic of the foundations of the system and the correct direction of the reform process. The pearl necklaces can be stained by the heavy perspiration especially in summer or if exposed to acid or alkali substances, so we need to clean them carefully and that refers to monitoring and supervision of the capital market in order to protect the legal rights and interests of investors. Because of these aspects, the only yardstick to test the efficacy and correctness of the reforms is whether the capital market is running smoothly.

Whatever the nature of market operation or administrative supervision is, those involved in capital market need to uphold the principle of progressing through stability. From the end of last year onwards, I have talked with many people, including, investors, agents, financiers from security firms, experts and scholars to get an understanding of their thinking. Based on my intuitive view, in the last year, they still expected nothing but stability; however, this year they are longing for some progress while maintaining stability. We calibrate our mission in response to the expectations of progress at our regular work conference that concluded a few days ago, resolving to make critical strides through various efficacious improvements and breakthroughs, especially the building of the systems we planned in cooperation with the players in the capital market.

People's Daily and its website:

Mr. Liu, you mentioned at the 2017 National Securities and Futures Regulation Work Conference that there are no confrontations between the stability of stock indices and the efforts of financing. Many investors are particularly concerned about IPO issues. How do you see relations between IPO and stock indices, and how will you solve what is called the "dammed lake" phenomenon?

Liu Shiyu:

Your question is somewhat sensitive. Certainly some people have worried that the increasing number of IPOs might affect the secondary market. In the past, when the capital market was facing heavy downward pressure, we reduced and even suspended IPOs to try to stabilize the market and ease the downward pressure. Those measures were effective for the moment but failed to be so in the long run. This is because they didn't improve the mechanism for the capital market's stable and long-term development, didn’t address the source of problems in the capital market nor enhance the capital market's ability to serve the real economy.

Surely, at a certain, fixed point of time, increasing IPOs will affect the supply and demand in the secondary market, but it will at the same time improve the average price-earnings ratio. In comparison, when seen over a period of time, the capital market’s fundamental driving force is serving the real economy and sharing its growth. A capital market detached from the development level of the real economy cannot last long. To make it last, there have to be new companies filling in to increase market liquidity and hence attract more capital. When the investment value goes up, the social confidence will enhance, too.

Since last year, the CSRC has been continuously strengthening its communication with the market. The mainstream opinion is that after the abnormal fluctuations, the capital market made a better self-recovery than it was expected, and thus now possesses the conditions to issue more IPOs in a timely manner. As I mentioned just now, the fundamental principle of our work is to respect the market mechanism and rules, and comply with market demand. In light of this, we stepped up IPO supervisions for the capital market and increased the number of listed companies in the capital market.

Evidence has shown that the practice, which was based on market consensus, was popular and durable. Last year, 280 companies were approved for IPO and 248 actually launched IPOs. Not long ago at the work conference in the CSRC system, I said that we had confidence to solve the so-called "dammed lake" problem. "Damned Lake" is a vivid metaphor for many companies lining up for dawdling IPO approvals.

In addition, there seems to be an expectation in the market that the long queue of IPO approvals as well as the sudden IPO of several new companies would send the market index downward. Bearing this in mind, when people see the number of companies waiting for an IPO increase from 500 to 600 or even 700, they tend to be excessively anxious about the secondary market. This is to say the number doesn't matter as much as the psychological effect on the investors.

I mentioned just now that we once suspended IPO when the stock market was moving downward, which twisted the psychological expectations of the market. We spent all of last year managing to correct the twisted expectations. Certainly, the key wasn't in how many companies were approved. Some friends from the press asked why only eight companies launched an IPO this week, whereas in that week, there were 14. I replied by saying that eight plus 14 divided by two is 11. I mean to say it isn't about the number of IPOs we approved but the qualities of companies applying for IPOs.

Last year, we made great efforts to enhance supervision of the soundness of IPO applicants, refinancing, merges and restructuring. We held IPO floaters and sponsors more accountable. Soon after you may see that the CSRC will publish some cases that have a large impact.

Last year, we required brokerages to shoulder their responsibilities in risk management. A total of 90 listed companies and sponsors voluntarily withdrew from companies queuing for IPO approval. It takes the joint effort of all to guard quality. High-quality listed companies would bring capital increments for the market, which is proven as a highly positive correlation.

Certainly, we are more prepared to deal with the "dammed lake" problem. Not only do our two bourses in Shanghai and Shenzhen have a better accommodating ability for new companies, the National Equities Exchange and Quotations (NEEQ) has more and more noticeable functions, ready to play a larger role. The regional equity market has clarified legal status and operation rules, which will help it play a correspondingly active role to solve the equity financing difficulties faced by local small-and-micro enterprises. When standardized merges and reorganizations are also an option, the capital market will have increasingly higher accommodation capabilities to corporate equity financing, resulting in listed companies whose qualities are increasingly higher.

In addition, you could assume another perspective in your way of looking at the number of companies queuing for IPOs. China is a developing major country, meaning that the innovation strategies being implemented will send more and more companies to be listed. This isn't a bad thing, but rather a good thing, because it's a reflection of China's economic vitality, and the source of flowing water for the development of China's capital market.

Reuters：

I have two questions. First, what do you think of the chances China will be included in the MSCI global index this year? My second question is this: the State Council said last year that foreign companies would be encouraged to list on China's domestic stock markets. That’s been said many times in the past. When do you think we will see foreign companies actually listed?

Liu Shiyu:

Thank you for raising these questions. I would like to invite Vice Chairman Fang Xinghai to answer you.

Fang Xinghai:

Thanks for your questions. We will always welcome A-share’s inclusion in the MSCI index. We believe that any emerging market stock index, whether it is the MSCI or any other index, will be very incomplete if there is no Chinese involvement. Whether A-shares are included in the MSCI index or not will be firstly decided by MSCI itself, as it is a business decision. We know there are a lot of commercial interests behind it, and we are willing to jointly discuss this matter with MSCI.

As for your question whether China will be included in MSCI this year, we are still unable to judge this so far. Whether it is included or not, the reform process of China's stock markets, as well as our entire capital market, in the direction of marketization, legalization and internationalization will not change. The pace of reform and opening-up will not change because of an A-share inclusion in MSCI, either. In the course of our discussion with MSCI, they have put forward some requests. Some are entirely consistent with the direction of China's capital market reform and opening-up to the outside world, so we will resolutely promote them. Of course, the pace of the promotion will be determined by development of the Chinese market itself.

Let me give you an example. The current suspension system of listed companies is still relatively inadequately standardized. Overseas investors will worry about this: "I bought your shares, but what if they are suspended and cannot be sold when I want to leave?" In my opinion, this problem should be given some attention and should be solved in an appropriate way. Domestic investors have the same concerns, so we will promote corresponding reform and opening-up policies.

Whether foreign companies can be listed in China means whether foreign companies registered overseas can be listed in China and this involves what is known as an international board. We are still working on this matter.

Some of the reporters here may still remember that, when I was working in Shanghai, I studied with relevant departments of the CSRC about promoting establishment of an international board. However, there are still some technical barriers. Take the accounting standards for example. Among the companies registered overseas, some follow American accounting standards, some follow the accounting standards of the European Union (EU), and some follow other international means. Once they arrive in China, these standards need to be adjusted accordingly and cannot be fully applicable. While changing these standards, we need to consider various factors, including the cost of the changes. So, technical work needs to be done in this regard.

In terms of market regulatory rules, such as information disclosure of listed companies, the practice in China is not the same as foreign countries. So, before an international board is launched, relevant rules of the system need to be adjusted accordingly. All in all, we have been working on this matter, but no timetable has been produced so far.

China Securities Journal:

Just now, Mr. Liu mentioned that the capital market should serve the real economy. We all know that the securities and the fund industries have made significant progress. The CSRC also vows to set up a national team which can represent China’s capital market. My question is: how will the CSRC make efforts to improve the capability and competitiveness of the securities and the fund industries, in order to serve China’s real economy. Thanks.

Liu Shiyu:

I’d like to invite Mr. Li to answer this question.

Li Chao:

Thank you for your question. By the end of 2016, China has 129 security companies with total assets of 5.8 trillion yuan (US$843.48 billion). The net assets have reached 1.6 trillion yuan (US$232.65 billion), buyout capital reached 1.47 trillion yuan (US$213.74 billion), and net profits have reached 123.4 billion yuan (US$17.94 billion). There are 109 fund companies with total assets of over 170 billion yuan (US$24.71 billion) and net assets of 110 billion yuan (US$15.99 billion). The assets managed by the securities and the fund industries reached 43 trillion yuan (US$6.25 trillion), among which publicly offered funds surpassed 9 trillion yuan (US$1.3 trillion), while private placement reached over 30 trillion yuan (US$4.36 trillion). Generally speaking, the securities and the fund industries enjoy abundant capital, and their capability and level of risk prevention and asset management have improved a lot.

In 2016, securities companies have provided professional services for a total of 7.5 trillion yuan (US$1.09 trillion) of stock, stock rights, bond and other financing. Currently, there are nearly 200 million publicly offered fund holders, more than 85 percent of them hold assets less than 50,000 yuan (US$7271.03). In terms of rate of return, since the open publicly offered fund was released in 2001, the rate of return for stock-leaning funds had reached 16 percent, while that of bond funds had reached over 8 percent, which provided 1.5 trillion yuan (US$218.13 billion) profit for fund holders. Actually, all the data above are average numbers, reminding us to avoid short-term runs. In this area, fund holders can learn experience from social security funds in terms of investment philosophy and asset allocation.

In addition, securities and fund organizations serve the Belt & Road Initiative and support countries along the route to issue Renminbi bonds. Meanwhile, the industry also serves the government’s strategy of poverty alleviation. Currently, more than 80 securities organizations are providing their help to over 130 national-level poverty-stricken counties.

The abnormal fluctuation in the stock market in 2015 set off an alarm bell for both the entire industry and the supervision department. It made us rethink the deficiencies existing in supervision mechanism and philosophy.

From 2016, the CSRC has insisted on overall strictly supervising according to law, and has made efforts to improve the supervision system. We will reinforce law enforcement efforts and strictly deal with those unlawful acts. In 2016, we carried out over 200 administrative supervision measures, not including administrative penalties, which involved dozens of the securities and the fund supervision organizations and related administrative officers and employees.

Next, we will stick to the overall position of CPC Central Committee and State Council, to hold the right supervision philosophy, so as to avoid systematic financial risk.

Bloomberg News:

Thank you. I’m with Bloomberg News. What are China’s plans to further open capital markets to foreign investors in the year ahead? And in your conversations with foreign investors, what do you find are their main concerns about investing in China’s capital markets and how does CSRC plan to address those concerns? Thank you.

Liu Shiyu:

Mr. Fang Xinghai will answer this question.

Fang Xinghai:

The foreign investors you mentioned are mainly from two groups. For overseas institutional investors who are willing to invest in the Chinese stock market and Chinese bond market, they can enter into the Chinese market through QFII and other mechanisms, including the Shenzhen-Hong Kong Stock Connect and Shanghai-Hong Kong Stock Connect. For overseas service providers, including securities traders, fund management companies and futures commission merchants, how can they enter into the Chinese market and provide service? First of all, our capital markets, especially the security and futures markets under the management of CSRC, welcome foreign investors and service providers to start business in China. The foreign shareholder's highest equity ratio can reach 49 percent in joint-venture securities, fund management companies and futures commission merchants. Private equity management can be run by foreign capital solely. Under the framework of CEPA between the Chinese mainland and Hong Kong, securities traders from Hong Kong can enjoy more discounts in the Chinese mainland. It is aimed at boosting the development of Hong Kong and strengthening Hong Kong’s position as an international financial center.

According to the deployment of the CPC Central Committee and the State Council, we will take some measures to encourage overseas institutional investors to participate in Chinese securities and futures markets in joint ventures, including a measure of the gradual improvement of the overseas shareholders’ highest equity ratio in domestic securities and futures companies, for a better future of domestic securities and futures markets.

In addition to the principle of opening up the capital market at China’s own pace, there is also a principle of promoting two-way opening under the framework of bilateral or multilateral international agreements on the basis of equity. We have been boosting two-way opening. For instance, as you know, China is undergoing negotiations with the United States and the EU in bilateral investment agreements. We are willing to boost the two-way opening and widen the opening up under such framework.

Xinhua News Agency:

The CSRC is now revising the regulation on listed company management. How will the CSRC take into consideration the leadership of the Party in the process? How to coordinate the two aspects effectively? Can you tell us about this in detail? Thank you.

Liu Shiyu:

The leadership of the CPC has stood the test of our people and history. The PRC’s Constitution clearly stipulates that the leadership of the CPC is the core feature of the socialism with Chinese characteristics. Article 19 of the Company Law states clearly the responsibilities of Party organizations towards companies. I hold that the Party organizations will shoulder different responsibilities in regard to companies with different ownership structures. At State-controlled listed companies, the Party committee forms the political and leadership core; at private listed companies, it is necessary to implement the rules of the Party, guarantee the rights of Party members, and give full play to the roles of Party organizations and members.

Maybe you have noticed that the CSRC severely punished some listed companies last Friday. No matter what kind of ownership is involved, a listed company should follow the fundamental political system in China and abide by its laws. Listed companies have to be responsible for the interests of shareholders, the society and the nation, and so should surely be under stricter supervision.

CGTN:

President Liu, as you have just mentioned, people are very concerned with the National Equities Exchange and Quotations (NEEQ). How will the CSRC promote the construction of a multi-level capital market system? What kind of new measures will be implemented on the reform of NEEQ and regional equity markets?

Liu Shiyu:

I’ll give the floor to our vice president Zhao Zhengping, who’s in charge of the issue.

Zhao Zhengping:

Firstly, thank you for your concern about the construction of the multi-level capital market. The Chinese capital market structure includes stocks, bonds and derivative products; the stock market with multi-level features includes the exchange, the NEEQ and regional equity entities. In the past two years, and especially last year, the NEEQ market developed rapidly with over 10,000 listed companies. Actually, up to February 24, the number had reached 10,715. With so many listed medium, small and micro businesses, we have had to improve the financing structure, enhance brand value and promote investment of social capital in start-ups. The equity financing volume of NEEQ listed companies so far totals 290 billion yuan, as President Liu mentioned. Last year, the figure was 139 billion yuan. Hence, this has resolved many financing difficulties for medium, small and micro businesses. The NEEQ market, being an important part of the multi-level market structure, still has further great potential in assisting innovative, start-up and growing businesses.

The regional equity market is also an important component of the multi-level capital market. Confined to the provincial administrative region where it is located, the regional equity market serves as a private equity market for local medium, small and micro businesses. Until now, there have been 40 regional equity markets established with a listing of 16,000 companies and a further 58,000 demonstration companies. The financing volume has reached 680 billion yuan.

Through our joint efforts, we hope we can turn it into an incubator for medium, small and micro businesses, an important channel for equity financing, and a comprehensive platform that medium, small and micro businesses will receive support from local governments so as to ensure that the capital market serves businesses and the real economy in a better way. Thank you.

Futures Daily:

Mr. Liu, good morning. The prices of some commodity futures, especially coal, steel and coke, witnessed great fluctuations last year due to the liquidity shock, which attracted widespread attention. The CSRC issued a series of measuresensuring stable operation of the commodity futures market in 2016. We noticed recently that the prices of rebar and iron ore futures have edged close to a record high. I wonder what does the CSRC have in mind in managing the commodity futures market this year? And, how will the CSRC further promote the reform and development of China’s commodity futures market so as to better serve the real economy? Thank you.

Liu Shiyu:

I will ask Mr. Fang Xinghai to answer your question.

Fang Xinghai:

This is a broad question. The trading of coal, steel and coke were quite active last year, and prices fluctuated greatly. This is due to a number of reasons. First, China wanted to slash production capacity last year. Second, the property market was active, leading to demand outstripping supply. Moreover, speculative capital constitutes a large part of China’s financial system. Speculation arises for two reasons: hype and the capital needed. The coal, steel, and coke futures market last year displayed the two factors, therefore, we saw a flood of speculative capital last year.

We managed to reduce the overheated trade volume last year as we adopted the following measures: increasing transaction costs, properly increasing the requirements for a cash deposit, tightening the position limits of some speculative accounts, and forbidding illegal accounts from trading and carrying out related investigations. The general idea was that the market did not need any unreasonably heated trading, and the futures market should be allowed to play its inherent role. We are satisfied with the outcome of last year’s management exercise, as trading overall was stable and the future prices were lower than spot prices.

We plan to operate some new features this year, such as option trading of agricultural products. We are also preparing for the introduction of crude oil futures, hoping it will be launched as soon as possible. We will step up efforts to make more trades available. In terms of transaction supervision, we will adhere to last year’s principles, namely, we don’t need overheated trading, but will pay more attention to pricing and seek to attract more industrial customers. Meanwhile, we will also further internationalize the futures market, that is to say, seeking more overseas customers to enter China’s futures market.

Lianhe Zaobao:

My question is about IPO. Recently, I heard that CRSC planned to help some local financial technology (Fintech) enterprises by making it easier to go public in the Chinese mainland market. Is that true? What are the specific methods? My second question is: since many Fintech enterprises do find it hard to go public on the Chinese mainland, they prefer the U.S. market to go public. How can you compete with overseas exchanges and encourage more Fintech enterprises to launch their IPO here?

Liu Shiyu:

Where to go public is, of course,an enterprise’s own choice, and the CRSC respects such choices. Public launches overseas can be supervised, and that is beneficial for overall enterprise governance, which is a good thing. Related systems in the Chinese capital market are being modified. For example, enterprises that want to launch an IPO on the Main Board should at least show three consecutive years of profit; however, most Fintech enterprises find it hard to meet such requirements. Currently, the Growth Enterprise Market and the NEEQ also face this situation. Investors like to share the achievements of those technology-based and Fintech enterprises, while also sharing the risks they may face.

As for you mentioned, about the competition between us and the New York Stock Exchange, or the Singapore Exchange, actually speaking, we are different examination rooms although using similar questions but different languages. For those enterprises going public overseas, they also have responsibilities because to some extent they represent China’s national image. Currently, there is only cooperation, but no competition between us and those foreign exchanges. I’m very confident about the development of the Chinese capital market, so I believe competition will emerge someday. Thank you.

China Business Network:

Last year, you warned some institutional investors not to become “barbarians.” You also said that you will punish the "financial crocodiles" at the beginning of this year. I wonder who the “barbarians” and "financial crocodiles" are. Thanks.

Liu Shiyu:

First of all, the top priority of the CSRC is supervision. This is its clear and unshakable role. Through supervision, that is to say, through legal, comprehensive and strict supervision, we can maintain an open, fair and just market order. Without these principles of openness, fairness, and justness, there can be no protection for investors’ rights. Without an open, fair and just market order, there is no effective protection for small and medium investors’ legal rights.

Secondly, I have spent long time to investigate the different forms of chaotic behavior in the capital market after I came to the CSRC and I feel a sense of shock. I wanted to find some simple, proper and comprehensible words to cover this chaos I found. I did not create these words -- the “barbarian,” “demon,” “pests” and "financial crocodiles" you mentioned. These people’s behaviors usually take place under a cloak of legitimacy; however, they are hurting the legal rights of the small and medium investors. The function of the CSRC is supervision. Can we just sit idly by?

Third, the temptation of big money is a huge issue for the financial market. There is only a slight margin in approach that differentiates an angel and a devil. It is just half step away from the gap between a financier in capital market and a "financial crocodile." Any transaction in capital market is recorded, including the earliest transactions calculated by an abacus. With the application of modern technology, especially the use of big data and cloud computing, any behavior, which is illegal, harmful to the small and medium investors, and destructive to the market order, taken by any individual or any institutional investor at any time is recorded. We will continue to rely on these past and current records. I reiterate that institutional investors in the fund industry should not become “barbarians,” “demons” and “pests.” I said we will investigate the "financial crocodiles" who hurt the rights of small and medium investors, but what I said focuses on behavior. However, we cannot presume that this or that person is behind the behavior, because there is still a long way to go. We need to investigate various clues and analyze the data to find out who is responsible.

You asked me who are the “barbarians,” “demons,” “pests” and "financial crocodiles," if I told you, I would be prejudging my future investigation. Thanks.

Hu Kaihong:

That's all for today's press conference. Thank you.