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State to cut holdings
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CHINA has unveiled long-awaited rules aimed at slashing the State's corporate holdings to raise money for the cash-strapped social security system.
But analysts said the move could depress stock prices in the short term while officials hailed the move as “favourable” to the market.
The rules require 10 per cent of the value of initial public share offerings or additional share issues to come from selling State shares and those proceeds must be given to the national social security fund.
State shares of listed companies are not tradable yet account for around 70 per cent of the capitalization of the mainland's 5.27 trillion yuan (US$632.4b) stock markets.
China said two years ago it was planning to reduce the government's stake in enterprises, and investors had worried the shares would be dumped on the stock market.
Now the government says that sales would be gradual and the impact on the market would be limited.
China needs to offload State shares to raise money for the severely underfunded social security system and to make listed firms more accountable to the public.
Finance Minister Xiang Huaicheng said the new rules would improve the quality of listed companies and corporate governance.
Zhou Xiaochuan, head of the China Securities Regulatory Commission, said separately on Wednesday the sale of State shares would have a limited impact on the secondary stock market.
(SD-Agencies)
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