On April 16, the day after the announcement of the new nine-point policy, China's A-share market suffered from sharp fluctuations. In particular, small-cap stocks, commonly known in the market as "small tickets", suffered a collective sharp decline, causing market sentiment to generally turn extremely pessimistic. On the day, the A-share index fell significantly, with only 279 stocks rising, compared to a staggering 5,066 stocks falling. This huge gap is like a cruel "meat grinder in the stock market", mercilessly eroding the patience and confidence of investors. What is even more shocking is that the number of stocks that fell on the day reached 746, which far exceeded the number of rising stocks, making the market mourn. Do you think it's normal for such a market to overreact like this? Is it forcing compromise?
In the face of such intense market turmoil, ZJH responded by clarifying that the introduction of the new nine-point policy is not aimed at suppressing all small-cap stocks, but its core purpose is to clean up some stocks that are widely considered "junk stocks". However, from my point of view, such an explanation for the current market volatility does not seem necessary. In fact, I believe that the current market reaction can be seen as an inevitable phenomenon of a transitional period, which is a natural process of the market adjusting and purifying itself in the new policy environment, but the process is not normal. In this process, market participants are re-evaluating their portfolios, weeding out stocks that do not meet the new norms, while looking for investment opportunities that can survive and thrive in the new environment, which is also a process of returning to the market value of stocks. Therefore, the current turmoil should not be seen as a market collapse, but as an important stage in the evolution of the market.
This process of self-adjustment and purification of the market is also a test for investors. It requires investors to not only pay attention to short-term market fluctuations, but also have a long-term vision to identify and seize those opportunities that are truly valuable for investment. In this process, investors' professionalism and rational judgment will become more important, which can not only help them maintain stability in the midst of volatility, but also occupy a favorable position in the future market competition.
The root cause of the sharp decline in the market value of small tickets can be traced back to the lack of restraint and regulation in initial public offerings (IPOs) in recent years. The excessive issuance of new shares in the market, especially with the large-scale entry of companies of different quality into the capital market, is undoubtedly tantamount to planting a time bomb that may detonate at any time. At present, this potential crisis has been triggered, leading to a wave of liquidation of early excessive speculative behavior. This wave of liquidation has directly led to the so-called "registration system" reform in name only, and the operation of the market has actually reverted to a more strict state similar to the traditional "approval system". While I am positive about this phenomenon as a regression of the regulatory system, it is more important to ponder why this "counter-current" phenomenon occurs.
Digging deeper into the root cause of this problem, we can find that the crux of the problem lies with financial regulators and industry practitioners. Although they ostensibly advocate the implementation of the registration system, they actually take advantage of the loopholes of the system to harvest the wealth of small and medium-sized investors in the secondary market in an improper way, and raise a large amount of funds to meet the private interests of individuals or groups. The so-called "registration system" that was implemented in China before did not meet the definition of a registration system in the true sense. It only weakened the ex-ante supervision of newly listed companies, but did not simultaneously introduce and ensure the implementation of an effective ex-post supervision mechanism. The lack of such regulatory measures has allowed a massive number of disorderly IPOs to expand, and these companies have squeezed money out of the market, eventually pushing the entire stock market to the brink of collapse. In this chain of events, it is the financial institutions and related interest groups that have really benefited from the manipulation of markets and capital.
The market crisis triggered by the indiscriminate issuance of IPOs has revealed the loopholes and inadequacies of the current financial regulatory system. For financial regulators, it is necessary to deeply reflect on and strengthen institutional construction to ensure the healthy and orderly development of the capital market, and for industry practitioners, it is necessary to reshape professional ethics, abide by laws and regulations, and safeguard the rights and interests of investors and market fairness. Only through comprehensive and systematic governance and strengthened post-supervision can we restore market stability, protect small and medium-sized investors, and prevent similar situations from happening in the future.
Similarly, China's commercial housing pre-sale system, which originated in Hong Kong, has significant differences between Chinese mainland and Hong Kong at the implementation level, and these differences have attracted widespread social attention. In Hong Kong, the implementation of the regime has been relatively successful, mainly due to its strict capital management and risk control measures.
Specifically, developers in Hong Kong must demonstrate that they have sufficient funds to ensure the smooth completion of the project when applying for pre-sale of commercial housing. In addition, through the establishment of a special trust account, the risk of bankruptcy is effectively isolated, so as to ensure the safety of the pre-sale funds. This mechanism provides a layer of protection for homebuyers to ensure that their funds are not misused and used for project construction. In terms of finances, Hong Kong buyers pay a deposit equivalent to 5% of the property price when signing the purchase contract (additional payment if there are special terms), and the deposit is locked in the trust account of the developer's law firm, and the developer will not receive the payment until the project is completed and the delivery is confirmed. Buyers apply for a mortgage loan before the construction of the home is completed and officially delivered. Throughout the construction process, a third-party agency is responsible for project appraisal and is subject to homebuyer supervision, which further increases transparency and trust.
In contrast, Chinese mainland's commercial housing pre-sale system requires developers to invest only 25% of the construction cost before obtaining a pre-sale permit. This low funding threshold allows developers to start pre-sales without sufficient funding, increasing the risk that the project will not be completed. More importantly, there is a lack of an effective segregation mechanism for trust accounts in the mainland, and even if there is a special account, the pre-sale funds may be misappropriated by developers for other purposes, which seriously threatens the safety of the pre-sale funds. In terms of payment structure, mainland home buyers often need to pay the full purchase price, rather than paying in stages as in Hong Kong. In addition, due to the lack of third-party independent appraisal agency participation in the construction process, real estate companies occupy an absolutely dominant position in the transaction, which to a certain extent leads to the neglect of the rights and interests of home buyers.
Hong Kong's commercial housing pre-sale system effectively protects the rights and interests of home buyers through strict capital management and risk control, as well as a transparent construction supervision mechanism. In the mainland, due to lax fund management, imperfect risk control mechanisms and insufficient supervision, the problem of the pre-sale system of commercial housing has become particularly prominent, which not only affects the stability of the real estate market, but also poses a threat to the rights and interests of home buyers. In order to improve this situation, it is necessary for the mainland to learn from Hong Kong's successful experience, strengthen capital and risk management, and enhance transparency to better protect the rights and interests of home buyers.
When analyzing some phenomena in China's financial market and real estate market in recent years, especially focusing on the problems related to the A-share market, it is not difficult for us to find a common crux: financial interest groups and real estate interest groups have shown a tendency to selective learning in the process of introducing and practicing advanced Western systems.
This kind of selective learning is not based on a comprehensive and objective perspective of reform, but out of the pursuit of maximizing self-interest. Specifically, when confronted with policy tools that can quickly promote capital market expansion and a boom in the real estate market, such as a large number of initial public offerings (IPOs) and the implementation of a loose pre-sale system, these groups not only actively adopt but also seek to promote them. However, when confronted with policy measures that may limit their freedom, increase their regulatory burden, or constrain their profit margins, such as strict post-regulatory mechanisms and effective monitoring of pre-sale systems, they show an evasive or even resistant attitude, intentionally or unintentionally ignoring the implementation of these systems.
This pattern of behaviour has serious consequences in practice. On the one hand, due to the lack of adequate supervision and restraint, interest groups often act too aggressively in the capital market and real estate market, resulting in an uneven allocation of resources and the accumulation of risks, which in turn leads to a series of structural problems, including unfinished properties; on the other hand, ordinary people, especially those who dream of owning a house of their own and investors who want to invest in the stock market for profit, often become the ultimate victims of these unstable factors.
In this game, ordinary home buyers and investors have become the so-called "leeks", who are at risk of shrinking or even turning into bubbles again and again in the midst of the violent fluctuations in the financial market and the real estate market. Their plight is sympathetic because most of them are motivated by the pursuit of a better life and a reasonable expectation of a return on investment, but often end up with heavy losses.
In the current economic environment, two important groups, home buyers and stockholders, face significant financial risks. This risk stems from an institutional design that appears to favor specific interest groups, resulting in deliberate economic damage to these groups. What is even more worrying is that this phenomenon is not an isolated incident, but is common across multiple industries and fields, indicating that there is a broad and deep problem.
In the economic structure of the mainland, the worker is the main body of society, so according to the theory, the income distribution mechanism should be more inclined to the income of labor rather than the gains of capital. However, the reality is far from ideal. The mainland has not yet established a tax mechanism for unearned income, such as capital gains tax and real estate tax, and even has no corresponding regulations on the taxes that may be generated when migrants leave the country, which is in stark contrast to the practice of some developed countries.
In the United States, for example, the country has established comprehensive taxes such as capital gains tax, property tax, and immigration departure tax, which effectively regulates the balance between different types of income and curbs the trend of excessive concentration of capital to a certain extent. These tax mechanisms not only reflect respect for the rights and interests of working people, but also reflect the pursuit of rational distribution of social resources.
In the face of such international practice, people cannot help but wonder: Why can't the mainland learn from the advanced experience of the United States and introduce these systems that are conducive to promoting social fairness and balanced economic development? This question points to a deeper problem, that is, the rationality and effectiveness of the mainland's system design and implementation.
To solve this problem, it is necessary to start with the design of the system and carry out fundamental reforms. This includes the formulation and implementation of a series of policy measures aimed at protecting the interests of workers, curbing excessive concentration of capital, and promoting balanced socio-economic development. For example, the introduction of capital gains tax and property tax could be considered as a way to regulate income distribution and reduce inequality between capital and labor.
There is also a need to establish a comprehensive social safety net to ensure that all members of society, especially those in vulnerable situations, are adequately protected and supported during economic transition. This includes adequate health care, education, employment and retirement protection.
These reforms must be implemented in parallel with transparency and public participation in policymaking. This can not only improve the acceptance and implementation of policies, but also enhance social cohesion and a sense of fairness.
In the face of the existing problems in system design, the mainland needs to adopt practical and effective measures to ensure the healthy development of the social economy, safeguard the fundamental interests of the broad masses of laborers, and achieve long-term social stability and prosperity. The key to the mainland's future development lies in formulating and implementing a set of scientific and rational systems and systems by studying and drawing on advanced international experience and taking into account the mainland's actual conditions.
In contemporary society, Zhang San's story is a typical depiction of personal struggle. As an elite family from an ordinary family, Zhang San successfully ranked among the top higher education institutions through unremitting efforts, including diligence in his studies and wisdom in career choices, and eventually obtained an executive position in a well-known company. This position brought him a high salary of 2 million yuan per year, however, due to the framework of the current tax policy, his labor income can only earn about 1.3 million yuan after deducting personal income tax, and he faces a tax burden of up to 700,000 yuan.
In contrast, Li Si's situation is very different. As a landlord with multiple properties, he easily earned $2 million a year by renting out these assets. Under the current tax system, the tax burden he bears is extremely low, only 5% of the income, that is, 100,000 yuan, and it is even possible to further reduce the tax burden through legal or clever means. This series of comparisons highlights the inequalities that exist in the mainland's tax system, especially the relatively high tax rate on labor income, which has formed a relative preference for capital gains.
Against this backdrop, new regulators are stepping in to correct this imbalance and push capital markets in a healthier and fairer direction. Although the market may experience some short-term pain along the way, such as the phenomenon of "more than 5,000 to rise, 746 to fall limit", these are seen as transitional difficulties and necessary steps towards a more robust market environment.
Under the new policy guidance, encouraging listed companies to increase the dividend ratio has become an important strategy of the regulator. This change is expected to make dividends a key driving force for the high-quality development of the stock market. In order to further incentivize long-term investment, a tiered taxation model has been implemented for A-share dividends, and investors will face different tax rates depending on the holding period. Specifically, dividends within 1 month of holding a stock are subject to a 20% tax, a 10% tax for holding a position for 1 month to 1 year, and a tax exemption policy for holding shares for more than 1 year. These measures aim to optimize the structure of the capital market and encourage investors to make long-term investments, thereby promoting the stability and sustainable development of the market.
In view of the many problems currently facing the mainland's financial market and real estate market, we can observe a phenomenon that cannot be ignored, that is, in the process of introducing the new system, certain interest groups tend to adopt a selective learning attitude, and may systematically exploit the loopholes of the system to exploit ordinary people. This is reflected not only in the design and formulation of the system, but also in the implementation and supervision. Therefore, in order to ensure the fairness and justice of the market and protect the rights and interests of investors and consumers, it is urgent to carry out in-depth reform and reflection and build a scientific and effective market supervision system.