Premier Zhu Rongji Backs New State-share Sale

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Last updated at: (Beijing Time) Saturday, December 22, 2001

Premier Zhu Rongji Backs New State-share Sale

Premier Zhu Rongji Monday urged China's securities watchdog to develop fresh measures to continue the sell-off of State-owned shares. "It's an urgent task for the China Securities Regulatory Commission and part of the cash earnings from sales will be continuously used to enrich the social-security reserve. Securities regulators should think of unveiling detailed measures and ensure market stability," Zhu said at a the conference of National Council for the Social-Security Fund.

Urgent Task for CSRC

At a conference in Beijing, Premier Zhu emphasized "It's an urgent task for the China Securities Regulatory Commission and part of the cash earnings from sales will be continuously used to enrich the social-security reserve"

Zhu said the recent suspension of the sale of State-owned shares was due to pricing and selling methods, which caused consecutive falls on the stock market.

Sensitive Plan of the Commission

In June this year, the commission announced a plan under which domestic firms would be required to sell their shares in State-owned enterprises. The proceeds were to go to a national social-security fund.

More Negative Effects Than Expected

However, the plan to sell off State shares produced more negative effects than expected, according to a senior researcher with the State Information Centre under the State Development Planning Commission.

Main Reasons

The researcher, who refused to be identified, said: "The unreasonable pricing and selling methods were the main reasons." State shareholders usually received State shares for 1.5 yuan (18 US cents) or so, while the public shareholders had to pay between 25 and 30 times that price to buy State shares, according to the plan announced in June.

Plan Suspended

The regulators realized that the sale of State shares was having an adverse effect and they suspended the plan on October 22.

Plan to be Continued

Contribution to Social-security Fund to Keep on

Zhu said: "We will not stop the reduction and sale (of State shares) because that is a channel for the central government to contribute to the social-security fund. "Securities regulators should think of unveiling detailed measures and, at the same time, ensure market stability."

Unfavorable World Economic Situation to Be Considered

Zhu took his decision taking into account the unfavorable world economic situation.

The global recession will affect China's economy and this, in turn, will bring pressure on the State's social-security system, which relies mainly on the State's tax income, according to Zhu.

About the Social-security Fund

Zhu made the remarks at a three-day conference of the National Council for the Social-Security Fund, a high-ranking body set up in September to operate the fund.

The fund derives partly from the proceeds of sold State shares as well as money allocated by the central government.

The main component of the social-security fund still comes from employees and their employers.

Xiang Huaicheng: State Share Reduction Beneficial to Stock Market

1, it is an objective requirement for solving the problem of shortage of social insurance funds and improving insurance system;

2, to reduce part of the state shares may relevantly lower the proportion of the state shares and make the equity rights of the listed companies more diversified.

3, the conversion into cash can help amplify the function of the state-owned economy, raise its controlling, influencing power and driving force, thereby contributing strategically to the readjustment of the state-owned economy.

4, part of the capital can return to the stock market since it is collected for setting up social insurance funds which in turn will enter into the capital market once entrusted to be operated by professional investment fund management institutions.

More Details

China Starts Sale of State-Owned Shares

State Share Sale Program, a Problem of How but not Whether, Economist

CSRC Invites Public Opinion on Methods to Reduce State Share