Zhou Xiaochuan, chairman of CSRC, said on Saturday in a national conference that irregularities in the stock market had greatly affected investors' confidence and the commission will take more rigorous measures to curb irresponsible behaviour and eradicate the roots of corruption.

A new supervisory framework to monitor the business operations of securities houses has been established to enable across-the-board oversight of trading, brokering and management of accounts within the firms, he said.

Security house senior executives will face tougher treatment if they are found to be involved in any of the irregularities, Zhou warned.

To prevent fraud in asset restructuring, the commission is also drafting a temporary regulation on takeovers of listed firms.

The rules are expected to come out within the year, Zhou said.

The CSRC chairman also encouraged the media to supervise the stock market and give suggestions about how it can be better run.

CSRC is now investigating two Shenzhen-listed firms suspected of stock price manipulation.

The cases have been in the limelight over the past few weeks and results of the investigation are expected to come out soon.

The scrutiny is just a small part of the regulator' efforts to maintain market order. Since July 1999, CSRC has investigated 236 cases of stock manipulation and other shady stock market activities. About 100 of the investigations have concluded and 88 institutions and 142 individuals have received administrative punishment. Some of the cases have been submitted to judicial departments for further investigation.

According to Zhou, the establishment of a stable market order will help lay a solid foundation for reform plans slated for this year, including scheduled debuts of open-ended funds and a second board, both of which will happen soon.

At the conference, Zhou claimed that the second board, which has been delayed due to changes in the international economic climate, would be launched as soon as possible to meet the financial demands of private and high-tech firms.

"We are trying to adjust the rules according to present market conditions and take various elements into consideration to keep risk at the lowest level,'' said Zhou.

On the main board, he said more large-scale enterprises would be listed this year, including banks and insurance firms.

In order to learn from the workings of international markets, CSRC plans to recruit more overseas experts to consult on and even participate in the creation of financial policy, said CSRC Vice-Chairman Gao Xiqing.

CSRC recruited five such experts last year, all of whom have taken high-ranking positions in the commission.

Meanwhile, authorities are pacing up preparation for a number of joint venture securities and fund management firms that will be launched after China's expected entry to the World Trade Organization this year.

China's stock market has staged a bullish rally since early last year and the number of stock traders has swelled to 58 million.

By the end of last year, it had 1,211 firms listed both within and outside the country.

Market capitalization in Shanghai and Shenzhen amounted to 4.8 trillion yuan (US$578 billion), up 81.7 percent from 1999.

(China Daily 01/16/2001)