China to Set Up Share-Purchasing Agency to Protect Investors

China plans to set up an agency to buy shares on the stock market, allowing regulators to exercise the rights of shareholders as they seek to protect the retail investors who hold most of the country’s freely traded shares.

The new body would give the China Securities Regulatory Commission rights including bringing civil suits against companies, the CSRC said in an article posted on its website Jan. 2. The plan is part of an effort to build a “relief mechanism” for investors, according to the article, which comprised a set of answers to investors’ questions.

Institutional investors account for about 14 percent of China’s stock market, compared with 50 percent to 60 percent in developed markets, the regulator said. CSRC Chairman Guo Shuqing has sped up approvals for foreign investors to buy yuan-denominated securities, seeking to bolster institutional participation in the stock market.

Guo has also focused on beefing up investor protection and combating fraud since taking office more than a year ago. The CSRC last month asked initial public offering advisers to inspect their clients’ financial statements by the end of March. The regulator will randomly examine the advisers’ “self-inspection” reports and take action against issuers and advisers if misconduct such as earnings manipulation is found, the CSRC said.

— With assistance by Aipeng Soo

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