Chinese authorities recently announced the start of an experiment to reduce state-owned shares in listed companies, signaling another step in the reform of state- owned enterprises (SOEs).

Statistics show that among China's 900-odd listed enterprises, non-circulating shares held by the Administration of State-Owned Property and state-owned corporate bodies account for more than 60 percent of their equities, while circulating shares held by general investors stands at only 30 percent.

Experts say that such an equity structure reduces the pressure from investors on the management of the listed SOEs, and is apparently contrary to the government's intention in listing such SOEs.

Chen Yufeng, a researcher with Greatwall Securities Co., Ltd., said reducing state-owned shares will lead to the diversification of the SOE equity structure and increase the managers' responsibility to their shareholders.

He noted that the move is also connected to the government's strategy of letting SOEs withdraw from certain sectors of the economy and increase their presence in the sectors where they must play the decisive factor, such as military-related industries, telecommunications and others.

Experts estimate that by reducing state-owned shares to an extent where such shares still maintain an absolute holding position of not less than 51 percent, the government will be able to recover tens of billions of yuan.

Qin Yongfa, an official of the State Economic and Trade Commission, said that if this money is spent on perfecting the social security system, it will greatly help the SOE reform, which will inevitably lead to massive unemployment.

Zhu Jianfang, a researcher with the China Securities Co., Ltd., said the government's experimental program is both positive and prudential.

As the first step, two enterprises will be chosen to take part in the experiment in 1999, with their shares for sale not to exceed 500 million yuan. (Xinhua)