The mainland securities regulator yesterday called for up to half the shares of state-owned enterprises going public to be allocated to the nation's pension fund.
Central and local governments are now required to transfer 10 per cent of the initial public offering of such enterprises they control to the pension fund, which is a major institutional investor in China's stock market.
Guo Shuqing, chairman of the China Securities Regulatory Commission, said 30 per cent to 50 per cent of the assets owned by SOEs and state-controlled banks and insurers should be allotted to the Social Security Fund, which would improve corporate governance at the listed enterprise.
The Shanghai Composite Index slid 0.9 per cent to 1,973.52 points yesterday, its lowest level in almost four years.
The pension fund, with 868.8 billion yuan (HK$1 trillion) of assets under management at the end of last year, has been acting as a market saviour in the past few years by buying stocks at low levels to underpin the market and improve investor confidence.
"Governments should not own many company assets," Guo said at a forum hosted by Caijing magazine in Beijing.
"State-controlled companies generally scored low in corporate governance," he said. "The market flotation of state assets is a very important step forward towards breaking administrative monopoly."
He also said that to break the state-backed banks' monopoly, China should reduce government approvals and make it easier for investors to set up community banks and offer various financial services in rural areas.
Cheng Siwei, an economist who is a former vice-chairman of the National People's Congress, said yesterday that it is the right time for private investors to set up community banks.
Cheng said he and other officials visited such banks in the United States several years ago, hoping to copy the model to serve communities and small firms.
The proposal at that time was for a pilot scheme to be launched in Wenzhou and Tianjin before expanding the concept throughout the nation.
Cheng said the "timing is ripe to launch the scheme now as the party's report in the 18th national congress said China should accelerate the development of private financial services".