That the China Securities Regulatory Commission released its opinion on reform of the share issuance system, is significant for the reform of China’s stock market, said an article in China Business News (excerpts below).

The key words of the document are marketization and rule-of-law. The document is in response to the overall reform blueprint of the Third Plenum of the Communist Party of China’s 18th Central Committee, which clearly proposed to “push through the reform of stock issuance and registration”.

The regulatory commission’s responsibilities are to verify the application files submitted by the issuers and intermediary organs.

It is the market’s duty to judge the enterprises’ profitability, instead of the supervisors’.

So investors and the market should estimate the values and risks of certain enterprises. The time and model of issuance of new shares should be controlled and decided by the market.

The market should have a bigger say in the pricing of new shares, which is conducive to forming a reasonable initial offering price of the new stocks, better reflecting the supply-demand relationship in the market.

It is necessary for the commission to attach importance to both the market and the rule-of-law in its reform plan.

Moreover, the commission also emphasized improving the transparency of the verification of new share issuance, especially in procedures of pricing and placing of new stocks.

Yet, this reform, if implemented, is only one step.

The final approval rights still rest in the hands of the commission.

To realize a complete registration system, lawmakers should amend the securities laws to give the market its overdue legal powers.