China should diversify its capital markets to allow there to be more investment products, such as blue-chip company bonds or high-yield bonds from smaller companies, and for investors with different levels of risk tolerance and capital strength, experts said.

The China Securities Regulatory Commission has introduced an investor-classification mechanism in an attempt to keep lower-income investors away from the high-risk market, "but there should also be alternative channels for their investment", said Wu Xiaoqiu, director of the Financial and Securities Institute at Renmin University of China.

His comments came as the commission is pushing forward a series of reforms to regulate the nation's capital market.

However, "investments in funds may suffer even more losses, bank deposits face very low yields, and government bonds are really hard to purchase", Wu said at a forum on Thursday in Beijing organized by the China Center for International Economics Exchanges.

Some may choose money-managing products from commercial banks, but these do not normally have a reasonable risk-return ratio, Wu added.

He suggested that a sound investment channel for lower-income investors would be corporate bonds and listed bonds issued by blue-chip companies such as PetroChina Co Ltd, as they provide higher returns than government bonds, "even higher than gold and property in the long term", he said.

Meanwhile, the first private debt issued by small and medium-sized enterprises, often referred to as "junk bonds" due to their high risks, may also be available for investors with a higher risk tolerance, according to Zhang Yujun, president of the Shanghai Stock Exchange.

The regulations and rules, products design, and communication with local government have been completed as required by regulators, and the bond will be issued within the first half of the year at the earliest, Zhang said at the 37th annual conference of the International Organization of Securities Commissions in Beijing.

Liu Kegu, former vice-president of China Development Bank, said the country should reinforce the construction of capital markets at multiple levels, such as the over-the-counter market, so as to allow more expanding and innovative companies to take part.

But Liu also called for higher dividends and lower costs, and less frequent transactions, to increase the rate of return.

Guo Shuqing, the nation's top Chinese securities regulator, said blue-chip stocks have "premium quality". Wu said that although the idea is basically right, it remains "a subject of controversy".

"It's not yet obvious in China because the Growth Enterprise Board hasn't been around for long, but the growth opportunities for smaller companies are much higher compared with for blue-chip companies," he said.

weitian@chinadaily.com.cn