Chinese equity markets proved to be anything but paradise for investors in 2011, despite robust economic growth, according to the Jiusan Society, a non-Communist Chinese political party.

Inside trading, price-fixing and swindling made the country's equity markets difficult for investors last year, the Jiusan Society said in a written presentation to the Chinese People's Political Consultative Conference (CPPCC) National Committee, China's top political advisory body.

The CPPCC began its annual session in Beijing on Saturday afternoon.

According to the Jiusan Society, 87 percent of 50 million Chinese equity investors posted losses in 2011, while institutional investors booked losses totaling more than 400 billion yuan (63.5 billion U.S. dollars).

The benchmark Shanghai Composite Index slumped 21.68 percent in 2011, making it one of the world's most poorly-performing markets last year.

The carnage in the stock markets also failed to match a 9.2-percent growth in China's gross domestic product (GDP) last year.

However, financing through equity markets disproportionally amounted to 678 billion yuan last year, which squeezed liquidity in the markets and further dampened investors' confidence.

Although the Shanghai Composite Index has risen about 12 percent since the beginning of 2012, a Friday rebound still left the index far below its peak of 6,124.04 set on Oct. 16, 2007.

The Jiusan Society said executives and managers of listed companies tend to pay more attention to financing through initial public offerings (IPOs), but have ignored their duty to benefit existing shareholders through dividend distribution after their companies go public.

Data from the Jiusan Society showed that the gross dividends shareholders have received from A-share companies over the past two decades accounted for only 17 percent of the total funds raised.

Yi Minli, a professor with the Chengdu-based Southwestern University of Finance and Economics, has also noticed the deviation.

"Investors, short-term or long-term, found it hard to make money by investing in A-shares," said Yi, who is also a deputy to the National People's Congress (NPC), China's top legislature. "It was not supposed to happen this way."

"If only violators of laws and regulations can make profits while honest investors fail in the market, there must be major defects in the system," Yi said.

Most complaints focus on IPO and delisting mechanisms, according to the Jiusan Society.

Analysts say a more market-based IPO mechanism and a much stricter delisting system are needed, arguing that the China Securities Regulatory Commission (CSRC) should perform as a true supervisory and regulatory body, rather than being just an IPO controller.

Many listed companies price their offering shares at extremely high levels, with the price-to-earning ratio usually jumping above 30.

Companies that have been operating at losses for three or more consecutive years rarely choose to delist, as only 1.82 percent of China's total listed companies delisted over the past 21 years, compared with 13.08 percent in the NASDAQ over the past three years.

"We can only promote the healthy development of equity markets by removing systemic defects through reforms," the Jiusan Society said.

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