MNI Policy: Immature China Capital Market Impedes Deleveraging

     BEIJING (MNI) - China's capital markets remain underdeveloped and

inadequate, having failed to support the government's drive to reduce leverage

and improve financial management, a prominent former central bank adviser said

at a forum on Tuesday.

     Chinese equity and bond markets are too often constrained by competing

policy goals to serve the expected role of channelling finance to productive

enterprises, said Li Yang, now head of a state-backed think tank, the National

Institution for Finance & Development.

     "The only role of the capital market should be the efficient allocation of

resources," Li said in Beijing. Yet in China, the stock market, for example, is

sometimes used to serve government initiatives such as poverty reduction, Li

said. 

     The capital markets in China are also ineffective in improving corporate

governance and managing risks, Li said. Too often, regulators only pay attention

to share prices and trading volumes and are too quick to initiate bailouts when

the market plunges. 

     Instead, regulators should create a transparent and fair environment via

comprehensive regulation, Li said.

--MNI Beijing Bureau; +86 10 8532 5998; email: william.bi@mni-news.com

--MNI Beijing Bureau; +86 (10) 8532 5998; email: marissa.wang@marketnews.com

--MNI London Bureau; +44208-865-3829; email: Jason.Webb@marketnews.com

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