China will crack down on illegal activities in the securities market and step up supervision of Chinese firms listed offshore, according to a guideline released by the State Council on Tuesday.
Clear targets have been set in the guideline released by the State Council. By 2022, major progress should be made in the accountability system to crack down on illegal activities in the capital market.
The capital market's legal system should be further perfected by 2025, at which time a law-advocating, trustworthy, regulated, transparent, open and inclusive ecosystem will be built in general.
The State Council's financial stability and development committee also held a meeting on Tuesday that called for more efforts to develop a capital market with Chinese characteristics and promote a circular relationship of finance, technology and industries.
As for strengthening cross-border securities regulation, the guideline said laws and regulations regarding data security, cross-border data transmission, and classified information should be further completed. Meanwhile, the country will seek to further deepen cross-border audit supervision cooperation in a law-based and reciprocal manner.
For the overseas listed companies, more efforts should be made regarding confidentiality and record management. There should also be measures to deal with the risks or emergencies of the overseas listed Chinese companies.
Two days before the State Council's recently released guideline, the Cyberspace Administration of China ordered the Didi app removed from mobile app stores in China due to its illegal collection of customer data. The ride-hailing giant, which just made its New York Stock Exchange debut on June 30, saw its shares slump 25 percent in the premarket trading on Tuesday.
Liu Junhai, a professor at the Renmin University of China Law School, said the guideline has laid the framework for strengthening a crackdown on illegal behaviors in the capital market, conducive to improving the quality of listed firms and safeguarding legitimate rights of investors.
"The guideline has reiterated China's commitment to integrate with the global capital markets, with emphasis on protecting data security of the nation and consumers in the process and advancing cross-border regulation cooperation," Liu said.
The guideline also said that delisting rules will be strictly implemented, and efforts will be made to check the legality of funding for securities investment to control the leverage ratio.
Illegal activities in the securities market will face more severe criminal punishment. Fraudulent issuance, fake statements, market manipulation, and insider trading will be investigated and treated more efficiently and strictly, according to the guideline.