CHINA sad Friday it would impose tighter foreign exchange controls on its overseas listed companies in a move analysts saw as another crackdown on rampant illegal corporate trading of Hong Kong stocks.

　Starting from September 1, these mainland-based companies will be required to repatriate proceeds from share and asset sales within 30 days, according to a joint statement by the securities regulator and foreign exchange watchdog.

　The rules were aimed at Chinese firms listed in Hong Kong as many had secretly played the territory’s market using money raised from buying and selling their own stocks, analysts said.

　“Many Chinese enterprises have foreign assets and used them to buy H shares or red-chips,” said Sun Hung Kai Research analyst Tony Yam. “But they can’t do that any more if funds have to be transferred back to the mainland.”

　H shares are mainland-based companies listed in Hong Kong. Red-chips are Hong Kong-incorporated, mainland-backed firms. China’s rigid capital controls ban citizens and corporates from trading stocks on overseas markets.

　But many dodge regulations to trade Hong Kong stocks, more transparent and liquid than domestic shares, raising government fears of huge foreign currency drainage.

　China has launched periodic campaigns to stem “hot money” outflows and in June last year, regulators swept into brokerages in Shenzhen to investigate illegal Hong Kong share tradings. It also cracked down on black market forex dealers in the country. The new set of rules issued Thursday by the China Securities Regulatory Commission (CSRC) and State Administration of Foreign Exchange (SAFE) take effect on September 1 and would further tighten regulatory loopholes, analysts said.

　An official at SAFE’s news department said the goal was to better regulate H share and red-chips. The rules apply to both Chinese firms that have listed shares abroad or have stakes in other firms that have listings outside the mainland.

　Formerly, China only required mainland companies to repatriate proceeds from overseas initial public offerings in a set of simple regulations issued in 1997.

　There were no explicit rules on overseas share sales following IPOs nor on asset sales abroad, analysts said.

　“The move is aimed at standardizing foreign exchange payments by overseas listed companies and strengthening management of foreign exchange repatriation and settlement,” said the statement published on the CSRC Web site.

　It said mainland-based companies must seek permission from the CSRC for overseas share buybacks and register with SAFE.

　Companies that want to inject assets into overseas-listed units must also register with SAFE first.

　“The new rules are expected to have a negative impact on Chinese shares listed overseas as we know some mainland companies are illegally trading Hong Kong shares,” said a senior trader at a major Chinese brokerage.

　“After the new rules, companies must report any share transaction to regulators. That will make it difficult for the firms to just get rid of illegally held shares on hand,” said the trader, who declined to be identified.

　Analysts saw the rules hitting Hong Kong-listed China plays, but did not expect it to deter mainland firms from initial public offerings in the territory or abroad. “The move is a tightening of foreign exchange management but it will not affect China’s efforts to list more companies on overseas markets,” said analyst Zhang Qi of Haitong Securities.(SD-Agencies)