Move of nontradable shares on test plan
China's securities regulator said yesterday that time is ripe to begin experimenting with the circulation of nontradable shares in some pilot listed firms.
A spokesman for the China Securities Regulatory Commission (CSRC) said yesterday that the commission would follow the principle of protecting the lawful interest of public investors when promoting the experiment and combine the strength and speed of reform with the capacity of the market.
It is the first time the securities authorities have given a clear indication of the timing of long-expected reforms to resolve the irrational share structure of listed firms. A move widely regarded as the basic cure to the ailment in China's stock market.
It is expected to gradually bring down the ratio of nontradable State holdings in domestic listed firms, increase market liquidity and rebuild investor confidence that has been damaged by the bearish market performance.
As a result of the planned move, about two thirds of all the shares in domestic listed companies are still nontradable shares that are either held by the State directly or State-controlled institutions.
This has greatly affected the market liquidity and put the minority holders of tradable shares in an unequal position, as they have little say in the decision-making of the listed companies but have to shoulder the major risks of stock price fluctuations.
Last February, the State Council pledged to actively and steadily solve the problem in a guideline document on the capital market development, but no concrete plan was introduced due to the complex nature of the issue and lack of consensus among relevant parties.
Confirming the readiness of the regulators to promote the pilot scheme for circulating nontradable shares, the CSRC spokesman did not say yesterday how many listed companies or who would be chosen to conduct the experiment.
The CSRC would further implement other reform plans.
(China Daily 04/13/2005 page2)