China calls for new ways to float state shares

China calls for new ways to float state shares

Tiffany Wu, Reuters, Shanghai/Beijing

China's stock market watchdog said on Tuesday, after Chinese Premier Zhu Rongji called for new ways to dispose of massive government holdings in listed firms, it was considering seven state-share selldown schemes.

The proposals include share placements, buybacks, warrants, funds and establishing a new market specifically to trade state shares, the China Securities Regulatory Commission (CSRC) said in a statement published on its Web site www.csrc.gov.cn.

Regulators suspended their first state-share selldown program in October after the controversial plan contributed to a 30 percent drop in share prices following its implementation in July and stalled China's IPO calendar.

The pilot scheme required listed firms to float a portion of their formerly non-tradable state shares in every ordinary share offering. Proceeds went to a cash-strapped pensions system.

However, the unpopular program raised fears the market would be swamped and angered retail punters who accused the government of selling the shares at aggressively high prices.

Zhu told a conference that resuming the selldown was "an urgent task", but gave no timetable, the official China Daily reported on Tuesday.

"We will not stop the reduction and sale because that is a channel for the central government to contribute to the social security fund," Zhu was quoted as saying. "Securities regulators should think of unveiling detailed measures."

Analysts said they expected state share selldowns to resume within months as the government lacked other means of raising money to help an aging population and the growing ranks of the jobless, already suffering from other wrenching state reforms.

About two-thirds of listed company shares are now non-tradable and the gradual flotation of state stakes would also bolster corporate governance and transparency.