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Reform of split share structure in three phases

(Xinhua)
Updated: 2005-06-16 10:55

The newly-launched reform to tackle the split share structure, one of the major problems blamed for China's sluggish stock markets, will be carried out in three stages, said Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC).

Shang made the remark in a recent interview with Xinhua after China selected the first batch of listed companies for the experiment of the reform earlier this month.

The split share structure refers to the existence of a large volume of non-tradable state-owned and legal person shares. This means only about one-third of the shares in domestically listed firms float on the stock markets. The structure puts public investors in an inferior position relative to the actual controllers in making corporate policies and disposing of the firms' profits and assets.

The first phase of the reform is the ongoing trial program, said Shang. Through the pilot projects in a few companies, China will explore methods on how to form the stock prices by the market while maintaining the stability of the market.

In the second stage, with continuous feedback from the trial program, China will issue a series of related rules and regulations to create a favorable conditions for further reform, said Shang. The rules are aimed to protect the legitimate interests of investors and enhance the adaptability of the market for reform.

In the third stage, with experience from the first batch of companies, China will expand the pilot projects, said Shang. "The reform of split share structure is vital to the Chinese capital market," he said. "It has started and the pace will not cease."