China is likely to intensify efforts to crack down on illegal activities that seek to improperly make money from stock issuances, as part of all-round efforts to ensure that the registration-based IPO system is equitable and investor-friendly, experts said.

"The most important task is to make the capital market more investor-friendly by improving corporate governance and strengthening regulatory capacity and credibility," said Liu Junhai, director of the Business Law Center at the Renmin University of China.

Aware of the existence of illegal activities such as fraudulent issuances, Liu said it is of great significance to adhere to market-oriented and rule-based reforms to make the operation of the registration-based system more transparent and fair.

The whole A-share market shifted from approval-based IPOs to the registration-based system in February after carrying out pilot projects initially in some sections of the market since 2019.

Widely used in overseas markets, the registration-based system features more inclusive listing requirements for innovation-oriented companies and is designed to give the market a decisive role in IPOs on the basis of transparent information disclosures of issuers.

Liu's comments echoed the tone-setting Central Financial Work Conference that called for efforts to ensure a thorough and effective implementation of the registration-based IPO system as part of the country's efforts to give full play to the pivotal role of the capital market.

Stressing the importance of supervision and the role of law in the registration-based system, Yi Huiman, chairman of the China Securities Regulatory Commission, vowed at a recent forum that the commission will intensify efforts to crack down on illegal activities such as financial fraud, fraudulent issuance and market manipulation.

Yang Haiping, a researcher at the Central University of Finance and Economics' Institute of Securities and Futures, said the new system has run smoothly overall with stronger support for the development of innovation-oriented companies.

Since the full adoption of the system, 203 companies have listed, raising 258.64 billion yuan ($36.16 billion) from IPOs in all as of early November. About four-fifths of the proceeds went to innovation-oriented enterprises that listed on the STAR Market and the ChiNext, data complied by Economic Information Daily showed.

Yang said there have been controversial IPO cases that were feared to be detrimental to investors' confidence where big shareholders and relevant entities seemed to have engaged in financial fraud or inflated IPO prices, to make quick money from the listings. It is a phenomenon that must be nipped in the bud, he said.

For instance, the Shenzhen Stock Exchange said on Nov 1 that it had stopped the review of the IPO application of Fuhua Tongda Chemical Inc, a herbicide maker that intended to use IPO proceeds to repay debt after having paid out big dividends in the past two years.

Yang said efforts on multiple fronts are needed to ensure strong deterrents that can make entities realize early on that they will pay a heavy price for any illegal market activities. Such efforts should include improvements to the system of investor protection and market rules for IPOs, big shareholders' stake reduction and listed firms' stock issuances.

Relevant efforts are underway as Shanghai and Shenzhen exchanges issued stricter rules this month for listed companies to raise funds on the A-share market, imposing restrictions on companies whose shares trade below book value or their IPO offer prices.

In a sign that investor confidence is improving following a raft of supportive measures, China's A-share market has staged a recovery since late October.

The Beijing Stock Exchange — the two-year-old bourse aimed at serving innovation-oriented small and medium-sized enterprises — led the rally as the BSE 50 jumped by 8.43 percent to 955.12 points on Wednesday, extending the gain since the beginning of November to 26.75 percent.

Looking ahead, Wang Jiyue, an independent investment banking analyst, said a thorough and effective implementation of the registration-based system would require efforts to go beyond facilitating IPOs to improving the basic functions of the capital market, including trading and price discovery.