The International Institute of Finance (IIF) has urged China to cut state ownership of listed firms and enact stronger laws against insider trading and share manipulation, including legal penalties.
The IIF yesterday issued a report on corporate governance at its annual spring meeting.
'It is necessary to diversify or decentralise ownership structure ... To develop the [stock] market, the state should provide a framework that encourages foreign and domestic capital to acquire state assets through mergers and acquisitions,' the report said.
'The [qualified foreign institutional investor] scheme is a welcome step and the annual capital allocation under QFII should be steadily increased,' it said.
Of the 1,287 firms listed at the end of last year, 940 were restructured state companies.
'The effectiveness of these listings has been severely constrained, both from the viewpoint of proper market valuation and improved corporate governance, by the fact that only one third of the shares are traded on the open market and the remaining two-thirds are held by the state as non-tradable shares,' it said.
