'There is just a limited number of leading companies in the mainland. They can't be churned out on to the market quickly like small to medium-sized enterprises,' said Shanghai stock exchange executive president James Liu on the sidelines of a capital forum held in conjunction with the China International Fair for Investment and Trade.

'I don't know of any country which lists its domestic enterprises overseas before listing them at home: Japan, Korea, Hong Kong, Singapore - none.'

Mr Liu said further overseas listings by the nation's potential blue chips would come at the expense of a domestic capital market built on the foundations of strong institutional investment sentiment.

The go-slow warning - jointly issued yesterday by the State Council Development Centre's financial research institute chief Xia Bin and former China Securities Regulatory Commission chairman Liu Hongru - is the strongest yet by senior officials, and comes on the heels of requests by regulators for companies to list at home and abroad.

The warning also highlights increasing worries over the bleak outlook for A shares and comes at time when the biggest state firms including Air China, China Netcom, Bank of Communications, China Construction Bank and Bank of China prepare to list abroad.

Big state firms, such as Huaneng Power International, China Mobile, China Life Insurance, PetroChina and China Telecommunications Corp, are already listed in Hong Kong.

In contrast, the Shanghai exchange, the country's main board, has only a few blue chips, such as Shanghai Baoshan Iron & Steel and Yangtze Three Gorges Power Development. The Shenzhen market focuses only on small to medium-sized enterprises.

However, officials from the US Nasdaq, Singapore, London and Hong Kong stock exchanges have been at pains to stress the advantages their markets offer over the mainland, such as a bigger pool of international capital.

'Every market has its own characteristics and companies should consider their needs before determining where to list,' said Christine Lie, a vice-president of business development and investor services at Hong Kong Exchanges and Clearing.

Mr Liu noted that previously, overseas-listed state firms had been sold on the cheap.

'The prices were unreasonable,' he said. 'It's only a matter of time before we have to bring these enterprises back,' he said, adding the leaders of their respective industries contributed substantially to the economy's expansion.

'The enterprises' markets are in China and their profits are derived here. Local investors should get the chance to share their profits.'

However, Mr Liu did not provide details on how to allow overseas-listed mainland firms to return home for fund raising.

China Mobile has proposed issuing Chinese depositary receipts but has yet to receive approval from the government.

A-share markets have yet to fully recover from June 2001, when the government initiated a pilot scheme to dispose of state shares in three listed firms.

The Shanghai A-Share Index has dropped 11.46 per cent this year while its Shenzhen counterpart has declined 12.18 per cent. Hong Kong's H-share index has lost 12.2 per cent.

Mr Liu said Beijing's austerity measures had given the mainland's 40 million retail investors negative expectations for future earnings and economic growth.

'The market is the aspirations of retail investors, and with so many of them, how can it be so wrong?'