Roughly 50 mainland firms face being delisted by the end of this year after mainland regulators tightened the criteria to remain listed.
The new rules, published by the Shanghai and Shenzhen bourses at the end of last month, have expanded the delisting criteria as part of the reform efforts of Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC).
The biggest hurdle now facing listed firms is likely to be a new provision on maintaining positive asset values, which could see the delisting of dozens of firms by the end of this year. Firms reporting negative asset values for two straight years will be expelled, the bourses say.
Net asset value measures a firm's assets minus its liabilities. If the value is negative the firm is considered to be insolvent.
According to Donghai Securities, 27 Shanghai-listed firms and 18 Shenzhen-listed companies reported negative net asset values at the end of last year. If their net asset values remain negative by the end of this year, their listing status will be rescinded immediately.
Analysts view the net-asset-value criterion as an effective way to cull poor-performing firms. Since the first delisting of a mainland firm in 2004, only 50 habitual loss-makers have lost their listing status, accounting for 2 per cent of the 2,500 A-share firms.
In America, the delisting rate at the Nasdaq market stands at about 8 per cent, and roughly 6 per cent for the New York Stock Exchange.