Economic Observer Online
Feb 23, 2012
By Peng You (彭友)
Translated by Ma Zheng
Original Article: [Chinese]

An official with China's Investor Protection Bureau, a new body that operates under China's securities regulator, acknowlegded at a press conference yesterday that many ordinary investors have endured large losses due to systemic problems related to how China's domestic stock markets operates.

In response to questions from journalists, the unnamed official said that many who played China's stock market - but especially small and medium investors - suffered huge losses following sharp falls on the domestic bourses over the past couple of years.

The main indexes on China's two main boards, Shanghai and Shenzhen, fell by 22 and 29 percent respectively in 2011.

The official went on to note that, "Although the reasons for these large falls are quite complicated, the underlying reason is related to weaknesses with the current structure of China's capital markets. In particular, full advantage is not being made of the markets ability to optimize the allocation of resources, mechanisms for restraining the market are weak and the system and mechanisms used to carry out market operations also have many problems."

A representative from the Investor Protection Bureau also told the EO that the ongoing reforms of regulations related to initial public offerings (IPO), the distribution of dividends and delisting mechanisms are all very important. The official also noted that many of problems that hurt the interests of investors, such as insider trading and the high share prices of poor-performing ST (special treatment) stocks, are closely related to the quality of government supervision and management.

The same official also said that we can't blame all losses on problems with the market system, as some investors simply don't make wise investment decisions. The official noted that one of the services that the new body planned to offer was to educate investors.

Although reports of its establishment did not emerge until mid-January, the Investor Protection Bureau was actually established at the end of last year.

The officials' responses to journalists questions was later posted to the CSRC's website.

Links and Sources
China Securities Regulatory Commission: 证监会投资者保护局负责人答记者问
Caixin: CSRC Sets Up Investor Protection Bureau