Zhou Xiaochuan, chairman of the China Securities Regulatory Commission (CSRS), said the market watchdog thinks highly of the role such investors play in developing countries.

"They can help introduce funds and technologies to developing countries, improve management skills and enhance competitiveness," he told the second international seminar on China's securities market held last week.

Stability, standardization, improved operations and quality are among the top priorities for the future development of China's securities market, he added.

China's securities market has undergone rapid growth over the past decade, said Seiichi Kondo, deputy secretary-general of the Organization for Economic Cooperation and Development (OECD).

Statistics show the capital value of the Chinese mainland's stock market last year peaked at 5.4 trillion yuan (US$650 billion), some 60 percent of its gross domestic product.

However, the market tends to fluctuate when its players are largely individual investors, says Seiichi Kondo.

"It is therefore a priority for China to encourage more institutional investors."

These institutions would undoubtedly bring competition, but would help expand the capacity of China's securities institutions in the long run through cooperation and merging, he said.

For years, China studied the feasibility of attracting overseas investment through the securities market, by introducing core institutional investors, said Zhou.

But he noted this would need policy support as well as regulation and supervision by the CSRC and other administrators.

In the future, securities regulators would consider the market situation when they draw up rules, said Zhou.

"In this way, we will hear the market's different voices. The principle is to create a stable market environment that is conducive to further development."

Of the 1,100 firms listed on Shanghai and Shenzhen stock exchanges, some 200 were privately owned and 70 were Sino-foreign joint ventures, and numbers were still rising, said Zhou.

(China Daily June 11, 2002)