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    Greater China
     May 3, 2005
China's SRC to attack share structure problem

BEIJING - the China Securities Regulatory Commission (SRC), the regulator of the securities industry, declared on April 29 the start of work to resolve the separate share structure problem of Chinese listed companies, which is widely regarded as the biggest headache restraining the development of Chinese stock markets. The split share structure refers to the existence of a large volume of non-tradable shares owned by the state and legally defined entities.

This means only about one-third of the shares of domestically listed firms actually float on the stock markets. This structure has put small investors in a weak position in influencing corporate policies and the rational disposal of the firms' profits and assets.

According to a 10-point document made public by the China Securities Regulatory Commission, the country's securities sector was informed of its decision to determine the candidates of listed companies for an experimental reform of the share structure problem, in a bid to maintain market stability and protect the legitimate interests of investors, especially minority shareholders. The listed companies, which according to the decision will be selected by their shareholders and related securities firms, shall determine, on their own, the solution to the troubled split share system. According to the document, the chosen firms will carry out required information disclosures and make sure the information is true, accurate and complete.

Analysts say the talk of "experiments" indicates that the much-talked reform will go ahead, which is expected to provide the country's stock market indices with a strong boost. The Chinese stock markets have slumped to six-year lows in the past few days due to the poor corporate governance structure of many listed firms, the split share structure and a lack of respect and protection of the legitimate rights of investors by both the listed firms and official regulators.

China's top legislature revamped the country's securities law earlier this week in a bid to lay a sound and solid legal foundation for the securities sector, which first took shape in the early 1990s.
(Asia Pulse/XIC)

 

 
 

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