Liu Jipeng: Reform and Funding Are Both Needed to Lift the Stock Market Back to 4,000 Points

Preface

On November 4, Liu Jipeng, a professor at China University of Political Science and Law, shared observations in a video about challenges facing China’s stock market. He focused on the compliance-related sale of shares by major shareholders, particularly in companies where ownership is highly concentrated. In his view, substantial share disposals by controlling shareholders and executives can undermine confidence, even when those transactions comply with existing rules. He also discussed the responsibilities of companies that have recently gone public, including improving business performance and ensuring that dividends benefit shareholders more broadly. His comments place these concerns within a larger debate about whether the stock market should primarily serve as a financing channel or become a more reliable investment market. Liu argued that returning the market to 4,000 points would require greater effort, with attention to both institutional reform and funding conditions.

Lazy bag

Liu Jipeng identifies concentrated ownership and compliant share sales by major shareholders as important risks for market confidence. He says companies should prioritize operating performance and treat dividends and share repurchases responsibly, rather than using the market chiefly as a way to cash out. His broader goal is to shift the stock market from a financing-oriented model toward one that better serves investors. In his view, a return to 4,000 points calls for coordinated action on both reform and funding.

Main Body

On November 4, Liu Jipeng, a professor at China University of Political Science and Law, posted a video setting out his views on the stock market. He described the issue of compliant share reductions by major shareholders as a central concern in a market where ownership is highly concentrated. His remarks distinguish between whether share sales meet regulatory requirements and what their scale and timing may mean for other investors. Even when a transaction is compliant, large disposals can raise questions about a company’s prospects, the incentives of its controlling shareholders, and the balance between insiders and public investors.

Liu pointed to several high-technology companies in which major shareholders and senior executives had sold shares worth more than 3 billion yuan or more than 4 billion yuan. He characterized compliant reductions in shareholdings as the market’s greatest threat. The concern, as presented in his comments, is not simply that shareholders sell; it is that concentrated ownership can make large sales especially influential. When people with substantial control or detailed knowledge of a business reduce their holdings, outside investors may interpret the move as a signal about the company or question whether the market offers adequate protection for long-term shareholders.

The reference to compliance is important. Liu’s criticism does not assert that the cited transactions violated rules. Rather, it draws attention to the possibility that transactions permitted by current regulations may still have consequences for market confidence. This raises a policy challenge: how to preserve legitimate opportunities for shareholders to manage their investments while ensuring that public markets are not weakened by selling practices that investors see as one-sided. Clear disclosure, consistent oversight, and well-designed rules can help investors understand who is selling, how much is being sold, and what safeguards apply.

Liu also discussed companies that completed initial public offerings this year. He said that 132 companies went public this year and that major shareholders held large proportions of shares in 75 of them. He urged these shareholders not to treat the secondary market as a route to cash out, but instead to focus on improving the performance of the listed companies. That argument places the emphasis on the purpose of going public: a listing can provide a company with access to capital, but it also brings continuing responsibilities to the company, its shareholders, and the wider market.

Improving a company’s results is a broad responsibility, involving management decisions, the use of capital, corporate governance, and the quality of products or services. For shareholders, stronger fundamentals can provide a more durable basis for investment than short-term trading activity alone. Liu’s remarks suggest that the conduct of major shareholders matters because their actions can affect how investors view the company’s commitment to growth. A listed company is not only a vehicle for raising funds; it is also an enterprise whose performance and governance are subject to public scrutiny.

Dividends formed another part of Liu’s comments. He said that dividends should not all end up in the hands of major shareholders. The point concerns how companies distribute earnings and whether the benefits of corporate profits are shared fairly among shareholders. Dividends are generally paid according to shareholdings, so investors with larger stakes receive larger sums. Liu’s warning, as reported, highlights the need to consider how ownership concentration shapes the distribution of returns and whether a company’s overall approach to shareholder rewards supports confidence among a broad investor base.

He also cited a practice involving share repurchases and employee incentives. In the example he described, a company first uses its own funds to buy shares in the secondary market. It then awards or sells those shares to senior executives and core employees as “Class II restricted shares” at approximately half the market price. Liu characterized such arrangements as harming retail investors. The concern appears to center on the terms of the transfer and the possibility that public-market shares acquired with company resources may subsequently be made available to insiders at a substantial discount.

Share repurchases and employee equity programs can serve different purposes, including returning capital or aligning employees’ interests with a company’s long-term performance. Their effects depend on details such as pricing, disclosure, eligibility, and the conditions attached to the shares. Liu’s example underscores why those details matter. If the structure is perceived to give insiders an advantage at the expense of existing shareholders, it may weaken trust in the company’s governance and in the fairness of the market. Transparent explanations and accountable decision-making are therefore relevant to assessing such programs.

These concerns connect to Liu’s broader argument that the stock market should move from being primarily a financing market toward becoming an investment market. A financing-oriented market is often evaluated by its ability to help companies raise capital. An investment-oriented market must also offer conditions in which investors can assess businesses, understand the risks they face, and have confidence that returns and governance are not systematically tilted toward insiders. The two functions are not necessarily incompatible, but Liu’s comments imply that financing should not come at the cost of investor confidence.

In his view, addressing the dominance of a single major shareholder is central to this shift. Concentrated ownership may support decisive control, but it can also intensify the influence of insiders over share sales, dividend policy, and incentive arrangements. The challenge is to ensure that companies remain accountable to all shareholders and that market rules take account of the power imbalance between controlling parties and dispersed investors. Reform efforts could therefore focus on governance, disclosure, and the practical protection of minority shareholders, while recognizing that specific policy choices require careful assessment.

Liu concluded that returning the stock market to 4,000 points would demand twice as much effort. He said that both the reform side and the funding side must be addressed to support the market again. These two elements concern different but related conditions. Reform can affect market rules, corporate governance, and investor protections, while funding conditions influence the availability of capital and the resources that can support market activity. His argument is that neither dimension alone is sufficient: institutional improvements need to be accompanied by funding measures if the market is to regain support.

The reference to 4,000 points expresses a desired market level, but Liu’s comments emphasize the measures he believes are necessary to pursue it rather than presenting a guarantee that the index will reach that level. His central message is that confidence depends on more than market liquidity or short-term price movements. It also depends on how listed companies behave, whether major shareholders act responsibly, and whether investors believe that public markets offer a fair opportunity to participate in corporate growth. Combining reform with attention to funding, he argues, is the way to rebuild that support.

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