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Plan to put state shares on market

China's securities regulators are considering a plan to allow listed companies to sell their unlisted shares on a case-by-case basis.

Investment bankers in Beijing said the policy would allow the 66 per cent of shares that could not be traded on the exchange to gradually become part of the market. It would also give the China Securities Regulatory Commission (CSRC) an exit strategy if the plans proposed by individual companies sparked a negative reaction from the markets.

'It's not official yet. If one or two companies do something investors do not like, they can put a hold on it,' said the head of investment banking for one western firm.

He said the regulators 'will probably start with smaller companies and let illiquid shareholders talk to liquid shareholders to get an ad hoc solution'.

State shareholders would work through a middleman, such as an investment bank, to devise a method of selling their shares, with the goal of increasing the liquidity of the market, according to mainland press reports.

A CSRC spokesman yesterday would not confirm the details of the plan, but said it had always been looking at ways to resolve the issue of non-tradeable shares.

The study should involve other government agencies, he said, but stressed that nothing had been concluded so far.

The new policy could also put two regulatory bodies on a collision course.

While the CSRC regulates the country's 1,400 listed firms, more than 200 of them are also under the control of the State-owned Assets Administration Commission (SASAC). Permission from both agencies would be required to proceed with any scheme to list state shares.

'When regulatory agencies overlap co-ordination problems and even outright conflicts can arise, and apparently the CSRC and SASAC have experienced some friction over how to handle state-owned shares in listed firms,' said Walter Hutchens, an expert in the Chinese securities markets at the University of Maryland.

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