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China to Allow More Stock Sales
Chinese investors watch an electronic board in Zhengzhou. China's stock markets have languished, despite the country's recent economic gains.
(China Newsphoto Via Reuters)
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China's leaders have searched for a way to unload the shares without decimating the markets. In May, they launched a pilot project, allowing 46 listed companies to make all of their shares tradable.
Since then, 45 of those companies have gained the regulatory approval needed to proceed with their plans, having won over existing shareholders with compensation schemes, according to Green.
The negotiations have brought controversy, with some accusing the state-owned companies of defrauding the public by giving away stock too generously. In a commentary published this month in Caijing, a Beijing-based financial magazine, Shan Weijian, an independent board member of Baoshan Iron & Steel Co., the country's largest steelmaker, criticized as unjustly generous the company's plans to hand out 2.2 new domestic shares for every 10 held. The non-tradable shares "belong to all the people in the country," Shan wrote.
Now, the other 1,300-plus companies that trade on China's stock markets are free to pursue such deals.
In seeking the assent of existing shareholders, the managers of listed companies will need to win over the country's domestic mutual funds, which have become the largest single owners of nearly every stock, together controlling some $46 billion worth of assets at the end of April, according to China Economic Quarterly. The total value of China's two stock exchanges was $525 billion at the end of 2004, according to state data.
Though these institutional investors are themselves controlled by state-owned companies, they have generally taken an aggressive line in negotiations for compensation, experts said. But in a clear sign that the government is still to a degree managing the rising and falling of China's stock markets, a senior executive at one of China's larger mutual funds said that in recent months regulators have pressured his firm not to sell off depressed stock holdings to help prop up the market.
Special correspondent Eva Woo contributed to this report.
