Capital formation mechanism and financial innovation

Author: Li Wanshou
Publisher:
Publish Date: 2003-09-01
Features: Capital formation is a necessary condition for economic development. The capital formation mechanism is essentially a mechanism for mobilizing and allocating social surplus, which includes three elements: savings supply, investment demand, and the savings-investment conversion mechanism. The interaction of these three determines the scale and structure of capital formation, with the savings-to-investment conversion mechanism being the central link. The conversion of savings into investment can be achieved through fiscal mechanisms or financial mechanisms, the latter of which can be further divided into regulatory financial dominance mechanisms and market-oriented financial dominance mechanisms. The innovations of this book include:
1. Clearly defining the three types of savings-investment conversion mechanisms.
2. Capital market institutional innovation is the key link in achieving the regathering financing function of the savings-investment conversion mechanism.
3. The further reform direction of the issuance system is to fully implement the registration system.
4. The circulation issue of state-owned shares and legal person shares is a bottleneck in the market-oriented reform of the capital market.
5. The networking of trading methods is the development trend of the capital market.
6. The hierarchical structure of market structure is an important support for the market-oriented reform of the capital market.
7. The internationalization of the capital market is an important development trend of the capital market.
8. The risk prevention and control mechanism and the improvement of regulatory systems are guarantees for the standardized development of the capital market.
The marketization of the capital formation mechanism is a systematic project. From the perspective of macroeconomic risk control, it must be based on the coordinated development of the economy and finance, relying on the overall transformation of the financial system, i.e., the deepening and moderate deepening of regulatory strategies in response to the conditions of the real economy. The marketization of the capital formation mechanism, in terms of its content, includes domestic savings, foreign savings, investment, and the savings-to-investment conversion mechanism, covering areas such as interest rate liberalization, the introduction and regulation of foreign investment, investment system reform, and the development of financial markets. Among these, the institutional innovation of the capital market is the core link in forming a mechanism for the full mobilization and efficient allocation of social surplus.
The institutional innovation of the capital market can typically be examined from the perspective of market structure or from the perspective of market entities and their behavior. The former mainly conducts research on the stock market, bond market, medium and long-term credit market, derivatives market, and venture capital market in sequence, while the latter mainly studies market entities and their behavior in terms of issuance systems, trading systems, and regulatory systems. Following the principle of "overall grasp and key breakthroughs," combining the above two examination methods, the author proposes the overall direction of institutional innovation in the capital market, which is marketization, legalization, and internationalization. Marketization primarily proposes institutional design plans for the registration system of issuance systems, the networking of trading methods, the circulation of state-owned shares, and the improvement of market structure. Legalization primarily proposes transformation plans from administrative means to legal means in terms of regulatory content, self-regulation, and external regulation. Internationalization primarily proposes related plans for the timing and sequence of opening up the domestic capital market.