China's securities regulator announced Sunday its decision to select 42 of its domestically listed firms for its second round of experiments to make it possible for all those firms to sell their non-tradable shares on the stock markets.

The China Securities Regulatory Commission made public the name list of the 42 domestically listed firms, including the country's steel giant Baosteel and hydroelectric giant Yantgze Power.

A leading official with the commission said the firms were selected for the experiments following the conclusion of the first round of experiments launched on March 9, which involve only four firms. The official said that blue-chip firms, such as Baosteel and Yangtze Power, were included in the new round of experiments after the commission accepted the proposals of market participants when summing up the experiences of the first round.

Analysts said the number of the firms chosen for the second round of experiments indicate the regulator is accelerating efforts to tackle one of the fundamental flaws of the country's capital market.

Only one third of shares of China's domestically listed firms are tradable on the domestic stock markets, and about two thirds of the shares of the country's domestically listed firms, mostly State-owned, are not tradable, a structural flaw arising from the country's lack of experience in building capital market and economic reform.

The structural problem puts public investors in a worse position than the actual controllers in making corporate policies and disposing of the firms' profits and assets, and has been blamed as one of the major factors for China's sluggish stock markets.

Under the regulations on the experiments, majority and minority stock holders have to reach agreements on ways to solve the non-tradable share problem and find a mutually acceptable arrangements through consultation. The regulations require the support of two thirds of minority stock holders with voting rights or more to pass the final solution to the non-tradable issue problem.

To date, only one of the four firms selected for the first round of experiments failed to pass its proposal, but the firm has said it will continue to probe ways to solve its problem.

Regulators have hinted that listed firms with the non-tradable problem will not be allowed to raise funds, including issuance of new shares, from the stock markets.
 
(Xinhua News Agency June 20, 2005)