China has taken another small step towards its first delisting of a company by saying that it would soon announce rules for stripping deadbeat companies from the stock market. 'The bell tolls for delisting,' read a headline in the China Securities newspaper. The same publication and other financial dailies published a brief report stating that delisting procedures would be announced soon. The sabre-rattling scared investors enough to sell down most of the stocks in the Special Trading category - those shares subject to trading curbs because of deep financial difficulties. 'This is a signal to investors that there is risk in the market,' said Peng Xiaoquan, an analyst at Guotong Securities in Shenzhen. 'There is lots of irrational investment in the market.' Fourteen of the so-called Special Trading companies in Shanghai and 19 in Shenzhen fell their 5 per cent limit yesterday. Another 10 counters are in the Particular Transfer category - which is even more precarious - and they trade only once a week. The impact of the proposed rules on these shares will not be known until tomorrow. China's securities law and company law permit a listed company to be removed from the stock market after three consecutive years of losses. But there are no specific regulations on how soon a loss-making company faces delisting after its third year of deficits. More importantly, Beijing is reluctant to make the hard decisions on delisting because it fears that might unnerve local investors so much they might not buy shares in the future. China is hoping to sell shares of many weak state-owned companies in a bid to raise badly needed cash. Zhengzhou Baiwen, a struggling retailer, has been teetering near the brink of bankruptcy for some time but regulators have held back from winding up the company and removing it from the stock exchange. A rescue package was arranged for the company but that bailout has run into serious problems, and public pressure is growing for government action. Zhonghao, a Shenzhen-listed firm with interests in trading, property and paper-making, recently warned it would report a fourth consecutive year of losses. Securities analysts said that despite the warning, the first delisting was not yet at hand. 'This would be very negative news for the market,' said Hu Weiqing, an analyst at China Securities, a major brokerage. 'Once the first one is delisted there are too many A-share companies that would also have to go.' Analysts also said that provincial and municipal governments were protecting local companies from any possible move to have them delisted. But the main factor was resistance from Beijing, they added. 'It is the [central] Government that is holding things back,' said Chen Tiwei, a consultant on corporate restructuring. 'But it is the government that has the most to lose, and there will be no change as long as it is willing to accept this burden.'