State share reform doesn't mean 'selling out'
(Xinhua)
Updated: 2005-06-27 16:44

China's top securities regulator said in Beijing on Monday, June 27, that the reform on non-tradable shares introduced recently aims at eliminating trading right difference between non-tradable and tradable shares, not floating all non-tradable shares at the stock market.

Shang Fulin, chairman of China Securities Regulatory Commission, speaks at a press conference on China's stock market in Beijing June 27, 2005. [newsphoto]

"Making all shares tradable doesn't mean selling out all shares," said Shang Fulin, chairman of China Securities Regulatory Commission (CSRC).

After the non-tradable shares become tradable, whether they would come into circulation or not depends not only on the shareholders' strategic choice, but also on relevant restrictions, said Shang.

He clarified the restrictions as follows: firstly, it depends on the entire strategic layout of state-owned sectors. After the reform on non-tradable shares is completed, state-owned shares can be cashed in only upon the approval of the state-owned assets authorities.

Secondly, it depends on the intention of controlling shareholders. Even though there are no restrictions in the laws and policies, the controlling shareholders will hold a substantial amount of shares in the long run in order to control the company.

The State-owned Assets Supervision and Administration Commission recently released the Guidelines on the Reform on Non-tradable Shares of State-controlled Companies, which specified the guidelines on the proportion of state-owned shares in state-controlled companies in line with the national economic restructuring and layout, as well as the need to facilitate a sound development of the capital market.

Shang also said that the controlling shareholders should unwind shares gradually according to the Securities Law and relevant regulations, while disclosing relevant information properly at the same time.

He said that the CSRC would gradually carry out the reform on non-tradable shares by following the principle of "pilot companies go first and others gradually follow up." Currently, reform on thefirst batch of pilot companies has been completed with a preliminary success, he added.

Capital market at crucial turning point

China's capital market is at a crucial turning point of development, he said at the press conference held at the Information Office of the State Council, China's cabinet.

With a series of policies and measures in place to promote its sound development, China's capital market has entered a period of adjustment in structure and operating mechanism, said Shang 

China's reform on its capital market now has clearer guiding principles, goals and tasks, said Shang.

Positive changes are taking place in China's capital market as a series of measures have been adopted to strengthen infrastructure construction in the market, Shang said.

Though it is a hard process, the direction of development is clearly defined, Shang said, adding that the market itself is also turning mature.

The internal mechanism that supports the operation of the market is under adjustment and a new mechanism is being formed, said Shang.

Nevertheless, he said, China still faces arduous tasks to promote reform and development of the capital market.

China started the latest reform on its capital market on May 9 to end a split share structure -- one of the major problems blamed for the country's sluggish stock markets.

Four companies were selected for the first round of reform experiment and 42 more were involved in the second round kicked off on June 19.

Transparency in stock market reform promised 

Shang promised that more effective efforts would be adopted to promote transparency in the country's stock market reform, especially the on-going reform on non-tradable shares, to stop inside trading.

In response to questions at the press conference, Shang Fulin said the reform on non-tradable shares is not "at any cost" as some people claimed." Instead, it will be carried out on the judgment of the overall and long-term benefits arising from the reform."

He said the reform is a very complicated issue, and the CSRC will take all related issues into consideration when formulating reform rules and regulations, including the reform of companies that have both A and B shares listed on the mainland stock market and H shares listed on the Hong Kong bourse.

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