WHERE should China's stock markets go from here? After five official years of experimenting with stock markets, the China Securities Regulatory Commission (CSRC) is sounding out key market practitioners and regulators in Shanghai for ideas on how to take the securities industry forward. Commission vice-chairman Tong Zengyin arrived in Shanghai early this week as leader of a 17-member delegation to meet a cross-section of people working in the industry. Mr Tong, also the vice-chairman of the State Council Securities Policy Committee, is scheduled to stay another week before returning to Beijing. A Shanghai Municipal Securities Management Office official confirmed Mr Tong was in Shanghai, but declined to reveal details. Industry sources said since stock markets were opened in China five years ago, the country's leaders had consistently labelled the move as an experiment. 'Now, they are beginning to stop describing the move as an experiment and are looking at what can be done to take the securities industry into its second phase of development,' a stock analyst said. Analysts said Chinese leaders had acknowledged the advantages of developing stock markets to provide an avenue for reform of state enterprises. But foreign brokers said in drawing up any plan, the CSRC must make clear to Chinese and foreign market practitioners what the official policy towards stock markets was. Richard Graham, Barings' group chief representative in China, said: 'When China took the bold step of creating stock markets, there was expectation among foreigners that they would operate like those elsewhere - free markets with self regulation by the exchanges.' But what the Chinese leaders actually had in mind were exchanges chiefly for raising money to support the government programme of getting rid of debts by state enterprises. Questions such as who could list, where to float, what shares to issue, and how much money to raise where decided not by the companies but by government leaders. 'The stock markets have helped to raise not only lots of money but also problems,' Mr Graham said. Another foreign broker said: 'The government leaders have to make clear what the stock markets are for. If they want the markets to develop along the lines of those overseas, they have to loosen their control gradually.' Some of these problems were tied to state shares and legal-persons shares, which were not freely traded on the exchanges. These untraded shares accounted for at least 60 per cent of the shareholding in most listed companies, causing liquidity difficulties. Industry sources said Mr Tong also would talk to market practitioners on what should be done to legal-persons shares, especially in the light of the Beijing Light Bus proposed deal last week to sell non-tradeable shares to two Japanese companies. The deal made headlines in China because it was unprecedented and formal approval from the CSRC was not secured. Sources said Mr Tong also was expected to finalise the successor to Wei Wenyuan, the Shanghai Stock Exchange chief.