SOEs urged to float overseas IPOs first
(Shanghai Daily)
Updated: 2005-12-23 09:18

Related: Reforms of SOEs will push ahead next year

China's state-asset regulator yesterday urged large government-owned companies to first float initial public offerings overseas and then list on the domestic markets.

The two-step approach is aimed at fostering better corporate governance and increased transparency and boosting the mainland's ailing equity markets.

The agency also plans to cut the number of state enterprises through consolidation and is encouraging firms to introduce outside directors as part of the key steps for future reforms.

"Overseas markets are better regulated, which can help Chinese companies optimize their corporate structures," said Li Rongrong, chairman of the State-owned Assets Supervision and Administration Commission.

"Listing overseas first and coming back later for domestic share sales will bring benefits to mainland markets."

China National Coal Group Co, the country's No. 2 coal producer, is ready for its initial public offering next year, Li said. Preparations for the stock sale are "proceeding well."

The listing site was not revealed, but media reports predict it will be overseas.

China has been stepping up measures to overhaul its capital industry, which has been plagued by a five-year stock slump and brokerage scandals. The government wants to restore investor confidence and is seeking more mature fund-raising mechanisms.

The country in May halted new share sales as it revived a twice-scrapped plan to trim as much as US$250 billion in mostly government-held stakes in listed companies and move them into the stock markets.

The asset regulator is fully confident over the prospects for the share-sale reform, Li said. As of early December, 310 out of 1,300-plus listed companies have had their sale plans approved by shareholders, among which 175 are state-owned or state-controlled, he said.

The government intends to issue rules in January to let companies that have finished shareholding shakeups to offer stock options to executives, according to Li.

China has 138,000 state-owned industrial and commercial enterprises with nearly 43 million employees, Li said. The country aims to shutter 4,000 to 5,000 state companies annually as part of a consolidation effort to bolster competitiveness.

Among them, China National Cereals, Oils & Foodstuffs Corp, the country's largest grain trader, is in talks to merge with smaller China Grains & Oils Group Corp, Li said.

Profits at China's 169 companies directly controlled by the central government jumped 24.7 percent year on year in the first 11 months to 565 billion yuan (US$69.7 billion), the asset regulator said yesterday. Revenue rose 21.8 percent to 6 trillion yuan.

The companies' combined profit is expected to reach 600 billion yuan for the whole year on revenue of 6.6 trillion yuan, it said.

China will also expand a program next year to let state-owned companies have independent directors after trials in six enterprises this year.

"We will focus on finding qualified outside directors for our companies," said Li.