11 May 2005
China will fully privatise some firms
- By Chris Buckley (International Herald Tribune)
Beijing, May 10: Chinese market regulators on Monday announced a trial programme to fully privatise listed companies in an effort to revive China's depressed stock exchanges. Share prices hit a six-year low, although some analysts said the reform measures might ultimately help revive the markets.
State companies that hold shares in four companies listed on the Shanghai or Shenzhen stock exchanges - Shanghai Zi Jiang Enterprise Group, Sany Heavy Industry, Tsinghua Tongfang and Hebei Jinniu Energy Resources - will relinquish control and offer their currently nontraded equity for trading on the exchanges, the China Securities Regulatory Commission announced before trading started on Monday.
The trial may eventually be extended to all of China's listed companies, the commission said. The issue of the state's vast holdings of nontradable shares has weighed on Chinese markets amid fears that the arrival of the stock on the market would reduce the value of shares currently held by investors.
Share prices fell on the news, with the Shanghai index dropping 2.4 perc ent and the Shenzhen slumping 3.3 per cent. However, some analysts said they welcomed the announcement, having watched share prices plunge to historic lows in recent months.
Investors have cited corruption, management incompetence and the cooling effects of government controls on the state-owned companies that crowd the country's two stock exchanges, in Shanghai and Shenzhen, as reasons for the slump.
"We need to start reducing state control and really putting companies into a market environment," said Mr He Jun, director of research at Anbound Group, an investment consultancy in Beijing.
If the plan is expanded beyond the initial four companies, the measures will jar sensitive political and economic nerves, analysts say. Government officials are reluctant to give up their control of companies.