Schriften zum Unternehmens- und Kapitalmarktrecht herausgegeben von Jörn Axel Kämmerer, Karsten Schmidt und Rüdiger Veil 42 Foreign Investments on Chinese Capital Markets Enforcement Concepts from a Chinese and German Comparative Perspective Edited by Rüdiger Veil and Xujun Gao Mohr Siebeck Rüdiger Veil was professor at Bucerius Law School from 2013 until 2017 and has held the chair of Private Law and Business Law at Ludwig-Maximilians-University Munich since then. Xujun Gao is Director of the German and EU Law Center at Tongji University Law School, Shanghai/China and holds the ThyssenKrupp AG Foundation Chair for Private Economic Law at the Chinese-German College for Postgraduate Studies (CDHK). ISBN 978-3-16-155596-1 / eISBN 978-3-16-158842-6 unveränderte eBook-Ausgabe 2019 ISSN 2193-7273 (Schriften zum Unternehmens- und Kapitalmarktrecht) Die Deutsche Bibliothek lists this publication in the Deutsche Nationalbibliographie; detailed bibliographic data is available on the Internet at http://dnb.d-nb.de. © 2017 by Mohr Siebeck, Tübingen, Germany. This book may not be reproduced, in whole or in part, in any form (beyond that permitted by copyright law) without the publisher’s written permission. This applies particularly to repro- ductions, translations, microfilms and storage and processing in electronic systems. The book was typeset, printed on non-aging paper and bound by Gulde Druck in Tübingen. Printed in Germany. Preface This book consists of a collection of articles on the development of China’s cap- ital market. It is derived from presentations and discussions made by academics and practitioners at the Foreign Investments on Chinese Capital Markets con- ference, held at Tongji University in Shanghai on 23 October 2015. The confer- ence was co-organised and co-sponsored by Tongji University, Bucerius Law School, the Konrad-Adenauer foundation (Shanghai) and the EU Law Institute of Shanghai Law Society. The conference, and therefore this book, would have not been possible without the support of all four co-organisers who had a broad vision for a comparative law conference on the important themes of develop- ments and enforcement-concepts in capital markets law, from both a Chinese and German comparative perspective. Over the last decade, Chinese stock markets have developed rapidly. The number of stock corporations listed on the Shanghai and Shenzhen stock ex- changes alone has exceeded 2,800 with a total market capitalization of RMB 46 trillion. Most importantly, these stock markets are increasingly gaining interna- tional influence, as they have recently been opened for foreign investment. This book discusses developments and enforcement-concepts in capital mar- kets law, from a Chinese and German comparative perspective. All stock mar- kets, regardless of size, country or region, need a regulatory framework ensur- ing stability and investor confidence alike. This has also been acknowledged by the Chinese legislature and the Chinese supervisory authorities. Nevertheless, China has been confronted with a number of challenges, especially strong price fluctuations. In addition, investors have lost large sums of money thus losing confidence in the functioning of capital markets. As a consequence, further ef- forts are needed to ensure the integrity of the markets and investor protection, in particular by enforcement mechanisms. This book is divided in three chapters. The first chapter sets the scene by ex- ploring the possibilities of foreign investment on Chinese capital markets. First, Xiang Jian and Chen Yicong explain the process of opening up the capital mar- kets in China and highlight important improvements. Steffen Gehring analyses the regulatory environment in China for foreign investors and the challenges and risks of Chinese capital markets. Interestingly, he points to some limitations for foreign investors; however, at the same time also acknowledges a satisfactory market access for them. The picture is completed by Gong Baihua’s article on the Shanghai Pilot Free Trade Zone, which he sees as an experimental field to understand the impact of the transpacific partnership agreement in China. VI Preface The second chapter deals with enforcement concepts in Chinese and German securities regulation. Again, Chinese authors shed light on enforcement powers of Chinese regulators (Su Huchao) and point to the need of investor protection (Xujun Gao). It might be interesting for Chinse scholars and the regulator how public enforcement works in Germany. Therefore, Thomas Höppner from the German supervisory authority BaFin explains the foundations of enforcement by supervisory authorities in Germany and Alma Pekmezovic and Rüdiger Veil expand on the enforcement concepts at the example of financial reporting in Germany, which is subject to a dual enforcement mechanism. In the US, but also in some European countries, private enforcement plays a prominent role. Therefore, Anne Gläßner, Manuel Gietzelt and Matthias Casper look at differ- ent ways of collective action applied in Western countries and compare them with each other. They are in favor of the French action de groupe, which would be more efficient than model case proceedings established in Germany, less prone to induce “bounty hunts” by lawyers as in the US and safe-guard inves- tors’ procedural rights. The third chapter refers to corporate law and asks which role the supervisory board plays in terms of enforcement. The relevant background here is that both Chinese and German stock corporations provide a supervisory board (two- tier-system) whose task it is not only to control the management but also to provide advice to it. Klaus J. Hopt explains that the German board system is highly path-dependent. Evidence of such path-dependency can be seen in par- ticular in quasi-parity and full parity labor codetermination in the board of corporations, but also in stakeholder orientation and a codified law of groups of companies with corresponding duties of the board of both the parent company and the subsidiaries. Guo Li and Matsuo Takayuki explain differences between the Chinese, German and Japanese systems of corporate governance. They rec- ommend reforming certain aspects of the Chinese system via the adoption of practices from the Japanese and German systems. In particular, full-time and better educated supervisors would be required. Guo Li and Matsuo Takayuki argue members of the supervisory board should ideally be more independent We do very much hope that the insights provided by the authors in this vol- ume are helpful for a better understanding of current developments in China. The comparative analyses shed light on the challenges and experiences in devel- oping China’s capital markets and provide food for further thought regarding possible reforms of the Chinese capital markets law. We would like to especially thank the authors for their valuable contribu- tions. We are also grateful for the support by the Konrad Adenauer foundation. Tim Wenniges and his team at the office of Konrad Adenauer foundation in Shanghai stood right behind this project and made the conference at Tongji University Shanghai possible. Thank you very much! Preface VII We are greatly indebted to Alma Pekmezovic and her team for the translation work. Last, but not least, we acknowledge our gratitude to Iris Kessler and Christian Voigt for their excellent work on the manuscript. Shanghai/Hamburg, April 2017 Xujun Gao and Rüdiger Veil Table of Contents Preface . V Chapter 1: Investments on Chinese Capital Markets Xiang Jian and Chen Yicong The Process of Opening up the Capital Market in China: Current Practice and Emerging Trends. 3 Steffen Gehring The Chinese Capital Markets – from a German Institutional Investor’s Perspective. 14 Gong Baihua The China (Shanghai) Pilot Free Trade Zone – An Experimental Field to Understand the Impact of the Trans-Pacific Partnership Agreement in China. 39 Chapter 2: Enforcement Concepts in Chinese and German Securities Regulation Su Huchao Enforcement of Regulatory Powers in Capital Markets: China’s Practice and Analysis. 47 Xujun Gao Internationalization of the Chinese Capital Market and the Improvement of Investor Protection in China. 59 Thomas Höppner Enforcement by Supervisory Authorities: Concepts and Experiences in Germany. 73 Alma Pekmezovic and Rüdiger Veil Enforcement of Financial Information in Germany . 79 X Table of Contents Anne Gläßner, Manuel Gietzelt and Matthias Casper Collective Action and Private Enforcement under the German KapMuG – A Comparative Evaluation - . 93 Chapter 3: Enforcement Concepts in Chinese and German Corporate Law – The Role of the Supervisory Board Klaus J. Hopt The German Law of and Experience with the Supervisory Board . 121 Guo Li and Matsuo Takayuki The Chinese Board of Supervisors System: An International Comparison . 143 Chapter 1 Investments on Chinese Capital Markets The Process of Opening up the Capital Market in China: Current Practice and Emerging Trends * Xiang Jian (项剑) and Chen Yicong (陈奕聪) 1 I. The Process of Opening up the Capital Market in China and its Achievements . 1 1. The Rapid Development of the Capital Market During the Reform and Opening-up . 1 2. The Improvement in Level of Openness of the Capital Market . 4 3. The Results of Opening up the Chinese Capital Market . 7 II. Current Trends . 8 1. Improving the Openness of China’s Capital Market . 8 2. The Strong Impetus for Opening up the Chinese Capital Market . 9 3. Gradual Improvement of the Market Environment by Opening up the Capital Market .