The top securities regulator reiterated the need to protect the legal interests of medium-sized and small investors in the capital market by redesigning the regulatory system.

A lack of small investors' protection is restraining development of the domestic capital market, Xiao Gang, chairman of the China Securities Regulatory Commission, wrote in an article published in People's Daily on Wednesday.

It sends a message that the securities watchdog is determined to resolve longstanding contradictions in the under-performing markets and rebalance the relationship between small investors and large corporate shareholders, analysts said.

The chairman's governing ideology has become clearer, although he has given few public speeches or published much on the subject. Emphasizing strict law enforcement, battling insider trading and protecting investors have distinguished Xiao's policies from those of his predecessors.

In Wednesday's article, Xiao pointed out that the current regulation system lacks a specific mechanism to protect investors' legal interests, but focuses more on ensuring the market's financing functions.

He said that under the current policy, large shareholders can deprive small investors of profits through mobilizing large amounts of capital.

"Information asymmetry, unsound returns on investment mechanisms, law and regulation violations by listed companies and incomplete rights protection have all damaged investors' interests," said Xiao.

According to data from the commission, about 90 million individual investors have opened accounts on the Shanghai and Shenzhen stock exchanges. Sixty percent of all share transactions are from investors with less than 500,000 yuan ($82,000) in their accounts.

"To protect the medium-sized and small investors is to protect the whole market," the chairman said.

Xiao stressed the need to protect investors' rights to complete corporate disclosure.

He also called for the approval of preferred shares, which have so far been excluded from the stock market.

In addition, Xiao demanded the establishment of escrow funds to expand the sources of compensation payments. He said he wants to launch a delisting risk management system to reduce small investors' potential losses.