Last week the
China
Securities Regulatory Commission (CSRC) announced some trial
schemes for the sale of State shares, a highly controversial topic
in the domestic market.
The trial schemes offer new ideas like selling State shares at
their asset value and setting up a special market for the trade of
State shares.
But more conspicuous than the content of these schemes is CSRC's
promise to take seriously public suggestions for the improvement of
these schemes. The cautious gesture shows the commission has
learned lessons from its past problems.
The initial State share sales scheme was implemented in June, when
CSRC required public firms to sell off State shares worth the
equivalent of 10 per cent of the proceeds from their other share
issues, despite strong objections in the market.
The market shed about 30 per cent of its value in the following
four months as investors feared mass selling of State shares, which
make up 70 per cent of all company shares, could swamp the
fledgling market.
Many also criticized the scheme as unacceptable because the
government insisted that companies sell State shares at secondary
market prices that were higher than the shares' value.
CSRC suspended the scheme in October. The day after it announced
the decision, nearly all stocks soared 10 per cent, the ceiling for
daily price jumps in the market.
The suspension, although it shored up the market at a crucial time,
pointed to the inconsistent way the commission administers the
market.
It
is natural that the scheme stirred huge fluctuations in both
indices and psychology because it affected the interests of a wide
range of areas in society.
The scheme is important to optimize the governance structure of
State firms and fund the social welfare system. It should be
carried out to bring about such improvements.
But the problem is the price of the scheme would be extremely high
if the market watchdog were to continue to make unpredictable and
ill-thought-out moves in the future.
Fortunately, the CSRC seems to have learned some lessons from its
previous mistakes. Its seeking for public opinions signals its
prudence and modesty, which is the key to avoiding blunders.
It
is believed that the final version of the scheme, although still
under discussion, will be more carefully considered and more viable
than the previous one.
(China
Daily December 27, 2001 )