The China Securities Regulatory Commission actively set its sights on the remaining unsolved problems and formulated a whole set of risk prevention and resolution systems.

The first step is to continue resolving the misappropriation of client transaction capital balances. By the end of 2000 the client transaction capital balance increased 127 percent to 303.7 billion yuan. However, the misappropriated amount decreased to 8.7 billion yuan, down 200 percent from 26.622 billion yuan from the year before. The misappropriation rate was 2.33 percent, with a decrease rate of 13.67 percent.

The number of securities companies climbed to 69 from 45 over the previous year, which has restored the client transaction capital balance completely. In addition, more than 300 illegal securities sales agencies have been removed. And some securities departments were successfully separated from their securities headquarters.

On June 28, 2000, internal securities functional departments and securities sales departments of China Huatuo Trust Company, China Great Wall Trust Company, China East Trust Company, China Xinda Trust Company and China Insurance and Trust Company, formed the China Yinhe Trust Company. The second step was to solve the remaining problems. On March 14, 2000 the China Securities Regulatory Commission decided stock equity transferences would begin from April and that it would take around 24 months to circulate on the market.

In 2000, about 2.985 billion yuan in stock equity transference belonging to 128 companies circulated on the market without affecting market order. This breakthrough will serve as a reference for other unresolved problems in our securities market.

The third step is to establish a national, unified securities registration and settlement system that will reduce the risk of settlement and guarantee the normal functioning of systematic payments. Based on the Stock Act, the Chinese Securities Regulatory Commission actively prepared to construct the China Securities Registration and Settlement Company, which began operations at the beginning of 2001.

The fourth step is to set up three major risk funds. According to the Stock Act and the Resolution of Establishing a Securities Market Risk Fund made at the Central Finance Conference, the Chinese Securities Regulatory Commission can set up a risk fund with cooperation from some relative departments. It will work to guarantee the stable operation of the securities organization to help prevent and solve individual risks.

The year 2000 saw the remodeling of supervisory ideas for the securities regulatory department. The first manifestation was to accelerate the marketization process. Owning to the new regulatory ideas, the marketization reform was carried through successfully in 2000. The central task of marketization is to solve residual structural problems and to increase the role of the securities market in investments, financing and capital collocations through structural adjustments.

These new ideas can be summarized as follows: Leave the problems to the market only if it can resolve them. The regulatory department should help create conditions for the market to solve problems when necessary. Based on these new ideas, the reform of securities marketization moved steadily and achieved great success.

Firstly, the stock issuance system has been reformed. Quota control and governmental recommendations were abolished and a new regulatory system, which included recommendations by major dealers, auditing by the issuing and auditing committee, and authorization by the China Securities Regulatory Commission, was carried out. Secondly, the marketization of issuing and price systems has been realized with new added measures of online price bidding, combined with sales distributions among legal persons and secondary market investors. This way, prices will be decided by the market. Thirdly, measures are taken to enhance the responsibility of self-disciplined organizations.

The second change of the securities regulatory department is to strengthen the supervision of the securities market to protect investor benefits. To achieve this the Chinese Securities Regulatory Commission put its emphasis on three aspects: strengthening the supervision of disclosing information in the listed companies; making efforts to increase frontline supervision on the market by establishing inspection substations in nine regulatory securities offices throughout the country; improving the securities market supervisory system and putting strict restrictions and administering punishments on illegal issues like manipulating stock prices and malicious speculation.

In 2000 alone, the Chinese Securities Regulatory Commission filed 118 cases that were contrary to laws and regulations for investigation and prosecution, and assigned administrative sanctions to 31 cases. The China Securities Regulatory Commission also made progress in system construction by boosting the structural adjustment of the listed companies. To support the construction of the modern corporate system at financial enterprises, the China Securities Regulatory Commission prescribed the content and format for revealing information to listed companies, which became the set rules for listing financial enterprises.

In 2000 the China Minsheng Banking Corp Ltd was given the green light to list on the market, including Hongyan Trust Company following its successful reshuffling. Other achievements in system construction include promoting online securities trust transactions. (The Commission has printed and distributed the Approval Procedure of the Online Trust Transaction for Securities Companies.) In 2000, 23 securities companies were approved to carry out online trust transactions, where business volume accounted for 3 percent of the total.

The third effort involves standardizing the actions of listed companies. The commission did a lot of work this year concerning the stockholder meeting of the listed company, external voucher, large assets reshuffling and disclosing profit forecasts and ST, PT company information. The fourth endeavor is to enlarge the securities companies. In 2000 some securities companies continued to boost their capital and stock shares after the 1999 increase.

By the end of 2000, about 22 securities companies accomplished this goal. Thirteen securities companies became the first comprehensive securities companies in China and 11 others were approved as brokers for securities companies. According to statistics, the total assets of the existing 101 securities companies topped 570 billion yuan -- up 87 percent from 308.1 billion yuan in 1999. The net capital amounted to 23.67 billion yuan -- 9.6 times that of 1999.

In the meantime, the China Securities Regulatory Commission and the People's Bank of China issued the Regulations on the Stock Impawning Loan of the Securities Company that allowed securities companies to obtain loans from the commercial bank by using stocks and securities investment certificates as impawning. The fifth goal is to set up a supervisory framework at the securities companies and the sixth involves making new progress in experimenting with securities investment funds.

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