Opinion | China needs drastic reforms to win back investor trust and confidence

Reforming China’s securities markets to lure back investors – amid a three-year rout that wiped out US$6 trillion as foreigners ran away – will require unprecedented changes. These range from greater transparency in companies’ financial statements and more rigorous oversight to fewer controls over local ownership.

Those reforms, though, will fail if Beijing’s “common prosperity” policy steps up efforts to sweep away free-market tenets and stifle financial innovation, trends that drove unprecedented growth for over 40 years.

In acknowledging the obstacles and assuring investors that Beijing has a new playbook, the new head of China’s securities watchdog, “Broker Butcher” Wu Qing, says he’s eager to make changes. His pronouncements are among many from top officials trying to turn around an economy beleaguered by a record property downturn, which constitutes a fifth of the economy and is the biggest store of household wealth.

Euphoria turned abruptly into moroseness as the post-Covid recovery floundered. The mature economy’s structural problems became apparent as the debt ratio reached a high – at 286.1 per cent of gross domestic product by December, according to Bloomberg.

Beijing’s almost-three-year crackdown on Big Tech reined in powerful companies and thwarted what would have been the world’s biggest initial public offering. All this added to the chilling effect of a different China emerging under President Xi Jinping.