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Four listed firms pioneer state share reform
Updated: 2005-05-09 08:54

Four Chinese firms will become China's first to begin selling untraded government-owned stock in a revived program to unload $300 billion worth of state shares that have pressured markets for years.

Beijing wants to sell those shares -- a legacy of a centrally planned economy that secures control by the state -- to help fund its social welfare system and enhance transparency in its Shanghai and Shenzhen stock markets, Asia's fourth-largest.

The pioneering four -- including machinery maker Sany Heavy Industries Co. Ltd. and computer services provider Tsinghua Tongfang Co. Ltd. -- said their publicly traded stock would be suspended from Monday.

The other two are packaging materials firm Shanghai Zi Jiang Enterprise Group Co. Ltd. and coal producer Hebei Jinniu Energy Resources Co. Ltd.

Their shares would resume trade if their selldown programs are passed or rejected by shareholders.

Stocks plunged 30 percent the last time China’s regulators tried it in 2001, as investors worried the massive sale of the stock -- comprising some two-thirds of total market capitalisation -- would flood bourses.

"Our company has won approval from the China Securities Regulatory Commission to pioneer state share reforms," Sany said in a statement published in the Shanghai Securities News.

Most Chinese companies have listed only a sliver of their total shares, with their state-owned parents and government-linked institutions owning majorities.

The four represent an eclectic mix of industry, from Tongfang -- an arm of the country's third-largest homegrown personal computer maker -- to private firms such as Zi Jiang.

All are mid-sized listed firms with between 52 and 75 percent of their stock being non-tradable state shares.

Jumpstarting Shanghai and Shenzhen Bourses

Analysts have warned the program, which on the surface appeared more acceptable to private investors because it would give them a bigger say in the process, could hurt markets in the short run because it heralded a wave of new shares.

China unveiled its latest state share reform ahead of a week-long Labour Day market break ended Sunday, jumpstarting the program after a four-year hiatus with policies that gave shareholders a say in how and when listed firms unload stock.

It also proposed steps to prevent bourses from crashing. The guidelines allow listed firms to proceed with stock sales only if two-thirds of non-state shareholders agree, and impose limits on the amount of shares in a listed firm that can be sold over one to two years, regulators said.

State shareholders must agree to list no more than 5 percent of a company's non-tradable shares in a 12-month period, and no more than 10 percent in 24 months.
Regulators are especially cautious about re-starting the controversial program with markets having already shed 8.5 percent this year -- extending a 15 percent dive in 2004 that made it the world's worst-performing major index.

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