China Weighing Global Standards for Its Markets, SEC Chief Says

China apparently intends to adopt international standards as it develops a legal and regulatory framework for its fledgling stock markets, Richard Breeden, chairman of the U.S. Securities and Exchange Commission, said Monday.

“It seems clear to me from the discussions we have had that . . . they have every intention of expanding markets,” Breeden said after three days of talks with banking and securities officials. “Their goal seems to be to have a market that would be seen as meeting reasonable quality standards by contrast with other capital markets around the world.”

Breeden, at a news conference at the U.S. Embassy, said the People’s Bank of China hosted his visit to learn more about how American stock markets are regulated. The People’s Bank supervises China’s two stock markets, in Shanghai and Shenzhen, but apparently favors establishing a separate body to handle this regulatory function.

While China still officially describes its stock markets as experimental, growing evidence indicates that the government has decided to use them in a major way to mobilize domestic and foreign capital for economic development.

Breeden said Chinese authorities see the U.S. Securities Exchange Commission as a model from which they can learn.

Continued government ownership of blocks of stock in what now are state-run enterprises does not present a major obstacle, at least in theory, to listing shares of such firms on Chinese markets, Breeden said. He noted that many Western markets list companies in which governments hold majority shares.

“What is important . . . is to make sure that the fact that agencies of government own blocks of stock does not result in any lack of integrity in the reports of results of those companies,” he said.

It is essential for China to make clearer the financial information about listed companies, and to bring its accounting and auditing procedures into line with international practices, he said.