The market watchdog has drawn up rules to allow non-mainland registered, Hong Kong-listed domestic firms -- known as red chips -- to list on the mainland's bourses, state-backed newspapers said on Friday.

The proposed regulations, reportedly circulated to market players, set criteria from market value to earnings and removed the main obstacle to long-awaited listings by firms from China Mobile Ltd. to CNOOC Ltd.

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An increasing number of such corporations -- including top global wireless firm China Mobile, offshore specialist CNOOC, world No.4 PC maker Lenovo and top retailer GOME -- have said this year they hoped to be among the first batch to list in Shanghai or Shenzhen, once regulations allow.

Among draft rules, a red chip has to be listed in Hong Kong for more than a year with a market capitalisation of at least HK$20 billion (US$2.6 billion), cumulative net income of at least HK$2 billion over three years, said Caijing magazine.

At least 50 percent of listing candidates' operating assets or earnings must come from the Chinese mainland.

The newspapers said at least 20 firms would be eligible for listing under those criteria.

Under the normal process, market players would consider and offer feedback to regulators on the regulations over coming months, though the China Securities Regulatory Commission would have the ultimate say.

The removal of underlying obstacles in policy and legal areas is expected to help stabilise see-sawing Chinese stock markets.

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