As listed Chinese companies gather pace in restructuring, the authorities are being urged to come up with more detailed and easy-to-follow regulations to make the exercise more transparent and fair.

Many domestic listed companies are hurrying with restructuring plans, skirting around existing policies before the regulators set up a comprehensive legal framework in the sector, a report in yesterday's Shanghai Securities News said.

The pricing of State-owned holdings, for example, is one common concern. To fix fair and transparent prices for such holdings during mergers and acquisitions would require the authorities to design clear standards for the deals.

The State-owned Assets Supervision and Administration Commission (SASAC) is currently drafting a regulation on the transfer of property rights owned by the State.

"The sooner such rules are released, the less losses the State will shoulder," said an analyst in Beijing, who did not want to be named.

The restructuring of the listed companies is a complicated matter and there are many gray areas where existing laws and regulations do not cover or specify, such as management buy-outs, he said. So some people would make use of the loopholes to seek personal gains.

Meanwhile, there is a lack of coordination between different government departments on the approval and supervision of such State share transfers in listed companies.

The government of Hunan Province recently announced a massive plan to sell State holdings in local listed companies.

In Wuhan, capital of Hubei Province, a similar plan is in the offing. The city plans to divest State holdings in 90 per cent of enterprises in the next two years, according to a document issued by the municipal government in May on SOE reform and development.

SASAC, set up to provide unified management of State-owned assets, needs to move faster to set up local supervisory agencies to take over the power from local governments, a SASAC spokesman said.

Otherwise, the local moves will make central bodies and regulations irrelevant; and it would be hard to monitor risks and curb fraud when SASAC takes over the powers.

To ensure efficiency, the restructuring would need sound macro planning, such as in what sectors should the State force withdraw, the timetable, and how to deal with critical issues, said Zhang Junkuo, a researcher with the Development and Research Center of the State Council.

Transparency is another essential to ensure fairness during the reshuffle.

The China Securities Regulatory Commission has issued a series of regulations on information disclosure of listed companies. It also announced a long-expected regulation last weekend on fund flows between listed companies, the major shareholders and affiliates to curb misuse of funds in listed companies and protect the interest of the minority shareholders.

But in practice, there are still avenues for listed companies to evade supervision and information disclosure and find new methods to misappropriate the funds, said Zhang Mingxing, a researcher with the State Information Center.

He urged the government to come up with liquidity plans for non-tradable State shares and let the market price reflect the real worth of listed firms.

(China Daily September 10, 2003)