The Regulation of Securities Offerings in China : Reconsidering the Merit Review Element in Light of the Global Financial Crisis

The aim of this paper is to critically examine China’s regulation for securities offerings in light of the recent financial global crisis and, based on these findings, make policy recommendations for future reform. The Chinese regulatory regime contains the key element of merits review, apart from disclosure requirements akin to those found in many other jurisdictions. This paper shows that China’s merits-based regulation suffers from a number of serious problems affecting the efficacy of the securities market. But the author argues against the idea of an immediate switch for China to the disclosure-based regulation, taking into account the weaknesses of the disclosure-based regulation, as evidenced in the recent global financial crisis, as well as its compatibility with the local conditions in China. It is submitted that while merit regulation may be anachronistic for advanced economies, the same cannot be said of emerging markets like China at least in the short run. Apart from its theoretical value in informing debate on the model of securities regulation, this paper is also of practical significance to foreigners who contract with or invest in Chinese listed companies