Legislators press on with securities law

CHINESE legislators will press ahead with the drafting of securities legislation, although government officials had previously said it would be deferred.

The sixth draft of the legislation will be tabled at the meeting of the standing committee of the National People's Congress (NPC) later this month.

The draft of the country's first companies law, considered a pre-requisite to the creation of a securities law, will also be considered at the meeting.

Analysts say the NPC's plan to go ahead with the securities law despite the administration's reservations shows that the legislature is eager to shed its ''rubber-stamp'' image.

A key member of the securities law drafting committee, Professor Cao Fengqi, of Beijing University, said: ''From the NPC's point of view, there is no question of deferring the law. On the contrary, the drafting process will be sped up.'' In a victory for the NPC-commissioned drafting committee, several government ministries reached agreement on five key areas during a recent conference in Beijing.

Officials from the NPC, the State Commission for Restructuring the Economy, the Ministry of Finance, the People's Bank of China, the State Council Law Office and the China Securities Regulatory Commission (CSRC) were at the conference.

Delegates agreed that to set an annual quota of stocks to be listed on the country's two exchanges would be against the principle of a market economy.

The drafters also persuaded other officials that the current two-tier management system, comprising the State Council Securities Policy Committee and the CSRC, should be replaced by a single regulatory authority.

It is understood that a senior CSRC official attending the meeting agreed that the current system was not ideal.

The drafting committee also won backing for its belief that new listings should be approved by the regulatory body and its local representatives.

The State Council's security policy committee currently has the final say, with the CSRC responsible for making recommendations.

''Some local officials also want a say in the process. This has resulted in a chaotic situation,'' said Professor Cao.

The proposal in the previous draft of the securities law to open up over-the-counter stocks trading has survived.

''Under the current circumstances, in which the two exchanges can not meet the huge demand from investors while a third exchange is not likely in the near future, an additional channel should be available for the issued stocks to be traded openly,'' saidProfessor Cao.

The securities law will not distinguish between state-held shares, legal person shares and publicly held shares.

''Whether the shares are in the hands of the state, legal person, or ordinary investors should not make any difference in the rights of the different shareholders,'' he said.

Professor Cao said whether the securities law could be enacted this year depended on the progress of the companies law.

which will cover both shareholding limited companies and limited liability companies.

He was critical of a provision that the Government, enterprises and some community groups could by themselves start a company, while at least two individuals were needed to do so.

''If the provision is adopted, existing enterprises can simply be renamed a company, without a corresponding change in their structure. This is not conducive to the reform of the enterprise system.''