The State Council, China's Cabinet, passed a draft document for reform of stock market listings on Wednesday. According to a statement issued after a meeting presided over by Premier Li Keqiang, the draft amendment to the country's Securities Law proposes changing the current approval-based system for initial public offerings on the Shanghai Stock Exchange and Shenzhen Stock Exchange to a registration-based system.

Once the draft is approved, related government departments will draw up detailed regulations for implementation of the new system and post-listing supervision.

The China Securities Regulatory Commission said in a statement that the pace and prices of IPOs will not be fully liberalized right away, and it will continue to handle IPO applications before the reforms are implemented.

The new system, which is expected to be in place within two years, is considered an important reform for China's stock market, as it will reduce the role of administrators, give the market a bigger say, and ease companies' financing difficulties.

It is of great significance especially after the volatility of China's stock market over the past half year, which wiped out nearly 40 percent of its value before a slow recovery.