On Supervision Cooperation Of Private Enterprises Listed In Hong Kong Stockmarket Between Hong Kong And Mainland China

Ever since China entered World Trade Organization, we have made great accomplishment in the area of negotiable securities and finance in China. Our industry of negotiable securities has been of a big proportion in the whole national economy. Meanwhile, more and more private enterprises from mainland went to Hong Kong and even abroad and were listed in those stockmarkets. The stock market in Hong Kong, which is the center of Finance in Asia, for its high efficiency and market maturity, attracts a large number of private enterprises from mainland to make dealings in the market. The number of such kind of enterprise has made many records among Hong Kong financial issues.However, in recent years, a lot of private enterprises from mainland which have their stock dealt in the stockmarket in Hong Kong have fallen into trouble. They failed to comply with the laws and regulations concerning negotiable securities supervision. And many defects and flaws of those enterprises began to come about. Those limitations are that the funds are utilized not according to what the enterprises have promised; the sense of self-discipline is rather weak; the sense of privatization control and household control is much too strong; the separation in interest between the parent company and subsidiary company is obscure; the national asset assessment system and accounting and audit system are not perfected.Such defects and flaws of those private enterprises from mainland had great influence on further financing of those public corporations and made it a failure to meet the demand in financing in Hong Kong stockmarket of those private enterprises from mainland. Investors as well will be suspicious of the quality of those private enterprises. Such phenomena reflect numerous problems in the supervision cooperation between mainland China and Hong Kong. But the cooperation in supervision of those private enterprises from mainland is almost nothing. The negotiable securities supervision bodies of both main land China and Hong Kong realized the necessity and urgency of strengthening the cooperation between Hong Kong and mainland China in the supervision of those private enterprises. And what is more, in the practice of supervision, there exist the obscure separation of duty between the negotiable securities supervision body of Hong Kong and that of mainland and even buck-passing between the two. This phenomena result in the stricter requirement of establishment of more explicit obligation between the supervision bodies of mainland and Hong Kong and the achievement of the cooperation and coordination between the two side. To make it worse, the halfway of the negotiable securities supervision system reform in Hong Kong lead to the encumbrance of the further development of the cooperation between the two bodies of mainland China and Hong Kong by the present Hong Kong negotiable securities supervision legal system. The material elements which decide the backward of today's negotiable securities supervision legal system are that Hong Kong exchange, as the front supervision body of public corporations and deals of negotiable securities, is itself a public corporation in the exchange. That means that Hong Kong exchange is of such a contradiction status between searching for profits and supervising the future public corporations and maintaining the stability of Hong Kong stockmarket. Therefore it is inevitable that Hong Kong exchange is liable to enlarge the scale of public corporations dealing in its stockmarket in order to chase more benefits. Those public corporations will include many private enterprises from mainland China, which will be of lower quality in credit standing. So there is no doubt those low-quality public corporations will be in deep water shortly after they get listed in the stockmarket. Another problem is that Hong Kong exchange, as the front supervision body for public corporations, has not enough power to execute the laws and regulations of negotiable securities supervision. And also the examining and approving legal system for public corporations in Hong Kong is weaker than we expected and is far from perfect in practice. Those problems add salt to injury for the difficulties in the public corporations supervision cooperation between mainland China and Hong Kong.The negotiable securities supervision bodies of mainland China and Hong Kong have to learn from the useful experiences of the references made by developed countries and districts and world economic unions so as to improve the negotiable securities supervision cooperation between mainland China and Hong Kong. These excellent experiences for the cooperation of the two sides are unilateral legislation for bilateral or multilateral legal cooperation, the signing of memorandum of understanding on cooperation, multi-jurisdictional disclosure system between Canada and the United States of America, intersectional judicature assistance treaties, international supervision cooperation among member states in European Union, and provisions of supervision made by International Organization of Securities commission. To use those fine references at home and from abroad is to make our own supervision cooperation closer and better. The two sides will reinforce their respective duty in supervision and make the work division more clarified in order to have nicer coordination and fill in the blanks with stronger supervision of private enterprises from mainland China which is going to get listed in Hong Kong stockmarket and finally lead to more developed and consummate negotiable securities supervision cooperation.