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China Starts Sale of State-Owned Shares
China has formally started the sale of state-owned shares in listed firms after a failed pilot program in 1999.
Three firms -- Jiangsu Suopu, Changzhou Chemical and Shaogang Songshan -- have become the first to sell part of their state shares in accordance with provisions issued by the State Council in early June.
In separate announcements for the issue of A shares, the firms said they will sell to the public state shares equivalent to 10 percent of the capital to be raised from the issues.
State shares and legal person shares combined account for an average of 68 percent of the total equities in China's over 1,000 publicly listed firms, far exceeding shares owned by the second- largest shareholder.
The dominance of state and legal person shares is a serious drawback in the corporate governance structure of the firms. It is widely held to be responsible for the less than satisfactory performance of China's listed firms in general and widespread misconduct at the expense of small shareholders and investors.
The reduction of state shares has been a hot topic of the market for years. In late 1999, Jialing Motorcycle and Guizhou Tire were chosen to take part in an experimental program, but the experiment could hardly be called a success, with high share prices keeping investors away and the underwriters having to buy part of the offer.
In June 2001, the State Council issued new interim provisions on the selling of state shares to the public, with the proceeds to go to the social security fund.
Under the new provision, a company has to sell one state share for every 10 shares it plans to sell in new issues at the same price.
Industrial analysts said the new provision represents a fine balance between the interests of the state, businesses and investors and is likely have a minimum negative impact on the market.
According to the government's strategy to adjust the state- owned sector, the analysts predicted that the reduction of state shares will mainly focus on companies in competitive sectors, such as textile, furniture, commerce and services industries.
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