China to Accelerate Reform of Stock Market, Report Says

China is expected to press ahead with an aggressive program of reforming its stock market, a report released by Standard Chartered Bank Thursday said.

The reform program is intended to facilitate more listings of state-owned enterprises as well as non-state enterprises, the report said.

Analysts from the bank said in the report that this is considered an effective way to introduce more corporate governance into the enterprises, as the presence of a substantial proportion of minority shareholders will put more public pressure on the management to look after the interest of the shareholders.

Currently, most large and medium sized enterprises in China are effectively majority-owned by the state and run by civil servants appointed by the government, they said.

Economists here believed that most state-owned enterprises need a lot of funds to modernize and upgrade themselves, and getting a listing on the stock market will help many of these enterprises to raise the capital required.

However, the report also cautioned that the experiences of many developing countries show that liberalization and development of stock markets are often a difficult balancing process.

It is of utmost importance that the government should handle the regulatory issues very carefully since excessive ups and downs in the stock market are difficult to prevent, the report said.



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