Resolving State-share issue urgent: official
(Shenzhen Daily/Agencies)
Updated: 2005-03-24 14:39

A member of the Standing Committee of China’s National People’s Congress (NPC) suggested the country should introduce “as soon as possible” a pilot program to solve the issue of allocating share rights, the China Securities Journal reported.

China should explore a “safe and feasible” plan to essentially solve the overhang of nontradable shares, also known as State-owned shares, in order to eliminate investor confusion, Zhou Zhengqing said in a question and answer article also carried in two other financial newspapers.

Such a plan should be acceptable to the government, companies, and investors, said Zhou, who is also vice chairman of the NPC’s Financial and Economic Committee.

He cautioned “to float nontradable shares is a complicated systematic project,” and there “absolutely can’t be too much haste” in solving the issue. Zhou said solving the share rights allocation issue wasn’t a prerequisite for the recovery of China’s capital markets.

Nontradable shares represent the bulk of capital in China’s stock markets. Leaving a majority of shares nontradable allowed the government to continue exerting control over listed firms when it began building stock markets over a decade ago.

But as nontradable shares increasingly change hands — such as in deals where strategic investors buy stakes in firms — there’s a growing understanding that the two tiers of capital are untenable. Zhou, a former chairman of the China Securities Regulatory Commission, also said central bank “controls” should take into account the capital markets and not just the money markets.

He was also cited by the newspaper as saying that legal funds should be allowed to enter the capital markets “continuously and smoothly” in order to solve the continued sluggish performance of the markets.

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