One word pretty much sums up China's stock markets: casino. With a combined market capitalization of $600 billion, the Shanghai and Shenzhen bourses are Asia's biggest outside Japan. But much of the action comes from small-time investors who "stir-fry" stocks with whispered tips to support widespread price manipulation.
Chinese regulators want to make the markets more like Wall Street and less like Las Vegas. The point man for the effort is China Securities Regulatory Commission Chairman Zhou Xiaochuan. Since the advent of a landmark securities law in 1998, the CSRC has issued 150 regulations. "If you want to have law enforcement, first you must have laws," Zhou says.
Just after Zhou took the helm of the CSRC in February, 2000, the commission ended a quota system that favored state-owned companies, paving the way for more private outfits to go public. Under his stewardship, international accounting practices are being adopted. And early this year, Zhou oversaw the first delisting of a money-losing company, a watershed event in a country where a listing is a badge of honor.
Zhou has a long career as a Chinese financier. Before taking over the CSRC, he spent more than a decade in state-owned banks and at the central People's Bank of China. The scholarly Zhou, 51, has co-authored 10 books on economic reform.
With the average Chinese stock trading at a sky-high multiple of some 60 times earnings, China's financial mandarins know they have a bubble on their hands. But Zhou insists that his job is to ensure a fair market, not to regulate prices. At least with Zhou at the wheel, investors know they've got someone with their best interests at heart.