The mainland government has adopted a policy encouraging large domestic companies to sell shares at home, instead of targeting only international investors.

The move is designed to improve the standards of the scandal-prone mainland stock market and open a new fund-raising channel for quality firms.

However, no mainland companies have so far successfully launched a simultaneous offering of A and H shares, partly due to the difference in valuation between the two markets.

Mainland reports earlier this month said the China Securities Regulatory Commission had given its approval in principle for Shenhua to sell H shares to international investors, putting it ahead of other mainland issuers also eyeing joint offerings, such as Bank of Communications, the mainland's fifth-largest bank.

Shenhua has been reported to be planning to sell 25 per cent of itself during the offering, 18 per cent as H shares available to international investors and 7 per cent on the domestic yuan-denominated A-share market.

Estimates of Shenhua's issue size have varied wildly.

Soaring domestic demand and surging mainland coal prices were expected to significantly lift its earnings and increase its valuation, sources said.

Shanghai Securities News this month reported that Shenhua's A-share offering could fetch 12 billion yuan, suggesting an overall fund-raising scale of more than US$5 billion.

Early reports said its H-share tranche would raise between US$1.5 billion and US$2 billion.

Spokespeople from Shenhua's underwriters - Merrill Lynch, Deutsche Bank, China International Capital Corp and China Galaxy Securities - either declined to comment or could not be reached last night.