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China issues new rules for sale of state-owned shares

China has issued long-awaited guidelines for the sale of non-tradeable state-owned shares in listed companies, according to a statement on the China Securities Regulatory Commission (CSRC) Web site.

The rules, which take effect immediately, will allow a small number of companies to take part in a trial program of state share-sales.

The CSRC and two-thirds of public shareholders will have to approve the conversion of state shares into publicly traded stock.

Buyers of state shares will not be able to sell them again for a year and after that will be restricted to sales of a maximum of 5 percent of a company's equity in each 12-month period.

Under the new rules, future initial public offerings (IPOs) will no longer have a non-tradeable share portion and individual listed companies will be able to decide on how the state shares are sold.

The CSRC said that state shares are "a big obstacle" to improving China's stock market and that the issue must be resolved in a "proper manner."

Non-tradeable state shares in more than 1,200 listed companies account for 66 percent of a 3.52 trillion yuan (US$424 billion) market capitalization.

The CSRC said it will select companies to participate in the trial program after considering the opinions of shareholders and the recommendations of listed companies' sponsors.

It added that the sale of state shares can only happen when "the market conditions are ripe" and IPO prices are stable.

The issue has dogged the stock market for years after initial plans to sell the state-owned shares sparked near panic among investors.

The authorities suspended the plan in 2001 but the stock market has never fully regained its footing and shares currently languish at six-year lows.

The markets are closed this week for a national holiday.
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