Chinese authorities are entitled to regulate mainland-controlled but overseas-registered companies known as red chips to ensure no dilution or loss of state assets, a senior official at the Hong Kong branch of Xinhua (the New China News Agency) says. 'Before their listings, the red chips are 100 per cent owned by the state and after listings, they are majority controlled by the state, ' Liu Zhiqiang, deputy director of Xinhua's economics department said. 'It is natural the relevant government departments should regulate the state-controlled enterprises.' His remarks came amid intense controversy over whether asset injections by mainland parents into red chips or spin-offs of their mainland assets should be regulated by the Chinese security authorities. This is the first time a senior official from Xinhua, which is in charge of supervision of all the mainland companies and is the mainland's de facto embassy in Hong Kong, has expressed a position on the thorny issue. The China Securities Regulatory Commission (CSRC) is close to releasing new guidelines over listing and asset injections by red chips, sources say. Mr Liu said controls should be improved on asset injections, red chips becoming the holding companies of mainland companies and cross-shareholding between mainland and overseas companies. Mr Liu warned against mainland-controlled companies rushing to list on Stock Exchange of Hong Kong. 'The asset injections by red chips should be done strictly in accordance with commercial and market principles and should be curtailed if the purpose is solely to expand the size of the companies,' he said.