Stock market Illustration: VCG

China's State Council, the cabinet, on Friday released a sweeping guideline, only the third of its kind, to strengthen regulation, tackle risks and promote the high-quality development of the capital market, as the country moves to build itself into a global financial powerhouse.

Following the release of the guideline, which mapped out plans to boost the capital market through 2035, Chinese securities regulators and stock exchanges also issued multiple notices for regulations in various areas such as IPO application, delisting of unqualified companies and high-frequency trading.

The move on Friday showed the country's determination to tackle risks and promote high-quality development in the capital market, which will not only help improve investors' expectations in the short term but will also lift China's financial industry globally, creating more opportunities for domestic and foreign investors, industry analysts said.

The guideline released by the State Council covered nine areas, including mapping out clear goals for the capital market over the next five years and through 2035, strengthening regulations on the listing process, stepping up supervision of listed firms, ramping up regulations on delisting of unqualified firms, and guiding more medium- and long-term funds into the market.

According to the guideline, China aims to build an overall framework for the high-quality development of the capital market in the next five years, a highly adaptable, competitive, and inclusive capital market by 2035, and a high-quality capital market matching that of a financial powerhouse by the middle of this century.

The guideline comes as China prioritizes becoming a global financial powerhouse. In October 2023, the top-level Central Financial Work Conference called for accelerating the building of a nation with a strong financial sector. This year's Government Work Report also stated that the underlying stability of China's capital market should be enhanced, sending a strong signal of China's commitment to building itself into a financial powerhouse.

This is only the third guideline - often referred to as "the State Council's Nine-Point Guideline" - released by the State Council specifically for the development of the capital market. The previous two guidelines were issued in 2004 and 2014.

Among the highlights of the new guideline is a focus on tackling challenges, especially prominent issues in institutional mechanisms, supervision and law enforcement, and other areas that have been exposed by the fluctuations in the stock market since August, Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), said in an interview with China Media Group on Friday.

"The guideline mapped out an exciting and inspiring development blueprint from aspects such as investor protection, quality of listed companies, development of institutions, regulatory capabilities and governance system construction," Wu said.

"This is great news for the market, which will reduce risks and set a positive direction for the medium and long term," Ade Chen, general manager at Guangzhou-based Fund Investment, told the Global Times on Friday, noting that investor protection was a key theme of the guideline.

Shortly after the State Council guideline was released, the CSRC also issued notices seeking public comment on various issues, including regulations for programmed transactions in the securities market and regulations for shareholding reductions. Among the main takeaways, the CSRC called for stepping up regulations on high-frequency trading.

Inside the Shanghai Stock Exchange Photos: VCG

Also on Friday, the Shanghai and Shenzhen stock exchanges released notices on rules for stock issuance and listing reviews. Along with the Hong Kong Stock Exchange, the two mainland bourses also jointly announced changes to the information disclosure mechanism for trading through the Stock Connect programs.

"The guideline offered a top-level design for the high-quality development of China's capital market, which will help promote the long-term and healthy development of the capital market and boost investor confidence," Yang Delong, chief economist at the Shenzhen-based First Seafront Fund, told the Global Times on Friday.

The guideline was released after the markets closed slightly lower on Friday. The Shanghai Composite Index was down 0.49 percent at market close, while the Shenzhen Component Index dropped by 0.78 percent. Chinese stocks have seen fluctuations since the beginning of this year, but have improved since February, with the Shanghai index gaining about 12 percent between February 1 and Friday.