The recent performance of the A-share market has drawn considerable attention from various sectors, signaling that it has reached a crucial historical junctureIt is imperative to systematically review the vulnerabilities in the A-share market, overhaul market regulations, and address its shortcomings without further delay.

In particular, as international powers cast a keen eye on China's valuable real estate assets amidst the increasing openness of its capital markets, the A-share market, which is home to these premium assets, may risk transforming into a "hunting ground" for international capital due to its continued price decline.

A vital issue that must be acknowledged is that the United States' drive for "re-industrialization" may merely serve as a transitional tactic, ultimately evolving into a strategy for "global industrial capital re-control." The means to achieve this? By seizing real industrial assets

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If accomplished, the bubbles in the US dollar and its debt could be promptly "filled."

Consequently, the pressure on the A-share market today exceeds that of the past; it must not only elevate the strategic innovative capital supply essential for the Chinese economy and win the tech war but also guard against malicious short-selling forces that threaten the financial wellbeing of the populaceMoreover, there is an urgent need to prevent high-quality Chinese industrial assets from falling into foreign hands.

What can be done? A dual-track approach to reform the supply-side structure of the stock market is suggested.

The first track focuses on maintaining a people-centered value orientation, methodically eliminating all malign influences in the stock market, and fostering a new market atmosphereThe second track emphasizes the necessity of financial supply-side structural reform—particularly regarding monetary policy—to reverse the prevailing trend of financial short-sightedness and create a robust capital source for the healthy growth of the stock market.

The expectation for a comprehensive overhaul of the A-share market is becoming increasingly palpable.

To "accelerate the construction of a modern financial system with Chinese characteristics," there must be a concerted effort to expedite the establishment of a capital market uniquely suited to China's economic landscape, one that continuously meets the evolving financial needs of society and its citizens

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This naturally demands elevated standards in the capital market, especially regarding rules that protect public interest, implying a need for sweeping reformMarket hope hinges on reform initiatives moving forward.

There is a crucial principle worth noting: invigorating the capital market fundamentally relies on enhancing investor confidenceIf stock market regulations fail to pivot effectively towards the vast majority of investors and continue to harbor various loopholes that favor fundraisers, can the construction of a "modern capital market with Chinese characteristics" advance smoothly?

China's stock market has undergone a transformation from an examination-based system to an approval system, and finally to a registration-based modelThe difference? Some interpret the current registration system as allowing companies preparing for an IPO to issue stocks based solely on adequate information disclosure—regardless of merit—thus placing investment responsibility squarely on the investors, likening it to practices in advanced stock markets.

However, we must recognize that established markets operate under an extensive suite of complementary legal frameworks and trading systems.

For instance, in developed markets, publicly listed companies face catastrophic repercussions for financial fraud

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Has the Chinese stock market managed to safeguard against such malfeasance?

Consider the prevalent system for new stock issuance in the A-share market, often criticized by investorsAt the moment a new stock is listed, demand overwhelms supply, leading to price manipulation and speculative trading, thereby fostering a distorted belief in "new shares never failing". This propensity causes an influx of short-term speculative funds in the primary market—making it difficult for real investors to engage with new offerings meaningfullyHow can we encourage investors to make informed decisions about new stocks? How can we sustain the value of newly listed stocks post-IPO? Simply ensuring comprehensive information disclosure is unlikely to suffice.

Highlighting such systemic flaws underscores the imperative for comprehensively and systematically reforming the supply-side of the stock market, which constitutes an essential part of the larger financial supply-side structural reform initiative

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This fundamental transformation needs to span conceptual frameworks, legal and regulatory structures, and trading rules, culminating in a benign market ecology where "the chicken eats the insect, the insect eats the stick, the stick hits the tiger, and the tiger eats the chicken." Such a complex project cannot be defined merely by the phrase "strengthen information disclosure."

As previously articulated, the deeper, more fundamental core principle of the stock market is centered around investor considerationsThis necessitates that regulators prioritize the protection of investors, particularly smaller investors, above all elseAdequate compulsory information disclosure is merely one of the tools to realize an investor-centric approach.

Moreover, clarity around a more fundamental concept is requiredWhen questioning the financial service for the real economy, one must recognize that serving the industrial sector results from finance, not its methods

Just as a bank must first ascertain trust and gather funds from depositors before it can claim to use credit services for the industrial economy, the stock market needs to adopt a similar approachOnly by genuinely providing investors, especially long-term ones, with returns commensurate with their risks can the stock market attract new capital and effectively support real economic growthConversely, if banks neglect savings protection and the stock market overlooks investor rights, both markets cannot function healthily, making the goal of supporting the economy moot.

Turning to the second aspect of the supply-side structural reform in the stock market

The reconstruction of the Chinese stock market's institutional framework is crucial; however, this is just one aspect of the multifaceted supply-side structural reform of the capital marketEqually significant is addressing the provision of investable capital and capital liquidity.

What kind of finance serves the real economy? Answering this question raises a fundamental issue, that financial development should revert to its basic function of "creating capital liquidity."

Financial services geared toward the industrial economy should not be limited to expediting the "monetary credit (monetary liquidity)" to real assets; such a viewpoint reflects a cognitive misunderstanding

The essence of financial assistance to the real economy is that financial markets must generate ample "capital liquidity" that safeguards long-term, effective operations of industrial capital while also providing the mechanisms for long-term investments and value realization of industrial capital.

If financial markets can only offer short-term monetary liquidity, they cannot create sustained long-term capital or liquidity, leading to the downfall of financial services for the real economy and capital market stability.

Historically, the finance sector has placed excess emphasis on the quantity of "investable capital" in the stock market while undervaluing the significance of "capital liquidity." This represents a serious deficiency in the architecture of financial and stock market development.

This lack of recognition has precipitated more critical issues: on one hand, there are calls to attract more "investable capital" into the stock market; on the other, monetary policies encourage an emergence of "financial short-termism." The result? A stock market where capital liquidity diminishes, causing investable capital to lack sufficient protection, ultimately making it responsible for generating its own liquidity.

This reality adversely affects the willingness of the investable capital to participate actively in the stock market while also incentivizing short-term trading behaviors, leading to significant fluctuations in the scale of stock investment funds, making it challenging to foster long-term investors.

Attention must be directed towards addressing A-share market's significant deficiency—capital liquidity.

So, what constitutes the supply of "investable capital"? This is relatively straightforward; it encompasses existing long-term financial resources suitable for stock investments, such as social security funds, insurance funds, and household savings

However, it's essential to understand that such resources are inherently limited, unable to significantly expand rapidly to satisfy the demands of a growing capital marketWhile these resources are crucial for the stock market's functioning, they largely represent a form of long-term investment with minimal liquidity—implying that they can be held long-term and do not continuously engage with market pricing.

What empowers the discovery of prices and the elevation of stock values? Capital liquidityTheoretically, capital value must be continuously realized through market trading; such persistent transactions hinge on active "capital liquidity." The value realization of long-term investable capital relies on sufficient capital liquidity that facilitates ongoing trading in the marketplace to discover and actualize investment valueThis is a foundational aspect of healthy capital market growth and a critical element in determining market dynamism.

As we ponder the A-share market, we must consider whether it indeed suffers from a deficiency in capital liquidity

Recently, the market patterns between the Beijing Stock Exchange and the Shanghai/Shenzhen exchanges exhibited a "teeter-totter" effect, characterized by simultaneous upward movements in one market while the composite index of the other plungedWhy? Because when capital liquidity began to shift towards the Beijing exchange, the Shanghai/Shenzhen market responded adversely, exemplifying insufficient capital liquidity within the A-share market.

Some experts assess market liquidity through turn-over rates, suggesting that China's high trading ratios compared to mature markets indicate liquidity is not an issueHowever, high turnover generally implies liquidity; yet excessively high turnover reveals rampant speculation and overshooting in short-term trading, suggesting that this liquidity reflects short-term monetary liquidity rather than genuine capital liquidityAn excessively high turnover rate in the A-share market indicates reliance on short-term monetary liquidity, thereby validating the deficiency of true capital liquidity

If adequate capital liquidity is present, it is feasible to have strong price discovery without necessitating frequent high turnover rates or exorbitant trading volumes.

Moreover, can the capital market fundamentally depend on short-term monetary liquidity for its operations? Certainly not, due to the colossal risks involvedThe excessive use of "off-market funding" in 2015, which provided rapid forms of monetary liquidity to investors, catalyzed a whirlwind of capital flow into and out of the market, leading to extreme volatilityWhy is there a need for vigilance regarding high-frequency trading? Experiences from established markets repeatedly indicate that excessively rapid trading cycles lead to detrimental cycles of extreme market shifts, prompting mature markets to impose necessary limitations on such trading practices.

Furthermore, the significance of "capital liquidity" for stock markets cannot be overstated

Historical evidence from mature markets and interventions, including those in 2015, highlight that the core philosophy is fundamentally about injecting sufficient "capital liquidity" into the marketFor instance, during the 2015 crisis, a coordinated effort by the central bank was made to provide substantial long-term loans to securities firms and institutional investors, delivering not investable capital but rather vital capital liquidity.

The quintessential nature of capital liquidity is paramount for stock marketsTheoretically, the term "capital liquidity" should have a market lifespan exceeding a year; the longer the duration and the lower the cost, the more substantial its refinancing qualitiesPost-2008 financial crisis, the Fed's alteration of its policy framework to favor long-term base money supply as a renewable driver of M2 growth serves as a model: reducing reliance on the monetary multiplier for inflating M2 supply stabilized rates while significantly boosting capital liquidity in markets.

It is imperative to assert that enhancing an active capital market fundamentally rests on strengthening investor confidence

The perspective of prioritizing "investor-centric" strategies should permeate all facets of market design and regulationWe must systematically evaluate and redress existing issues within the A-share market's current rules, tirelessly fostering a transparent, equitable market ecosystem that resonates with justice.

Ultimately, invigorating the capital market hinges on collaborative efforts throughout the financial landscape, with the central bank playing a pivotal role in ensuring the provision of sufficient capital liquidity to stimulate the marketA reform in monetary policies to ramp up the provision of long-term basic capital is crucial, as failure to do so risks perpetuating the short-termism trend, leading to further liquidity shortages within the market.

These analyses lead us to emphasized conclusions: the vitality of investor confidence remains paramount to an active capital market, necessitating an unwavering commitment to fostering an environment that prioritizes investor rights and fair practices