The Shanghai Stock Exchange will launch a dividend-based index in December as part of moves to bring greater stability to the relatively volatile domestic market. The exchange would compile a list of 30 to 50 companies that paid steady dividends and build an index, executive vice-president James Liu said. 'This [index] will have a market-leading function,' he said. China has been struggling to introduce stability to its fledging capital markets while pressing companies to improve corporate governance and raise efficiency. The index would be based on similar products available on international markets, the Shanghai Securities News said. Companies on the index would have stable, high dividend payouts and be very liquid stocks, the newspaper said. 'It signals the regulatory bodies are directing mainland companies on the road of reform - improving their corporate governance,' a Shanghai brokerage analyst said. 'The new index is the forerunner of the market reform.' The dividend-based index follows the introduction of exchange-traded-funds (ETFs) last month, as part of the drive to widen the range of investment products available to investors in a bid to expand trading volume at the exchange. Like the soon-to-be-launched dividend-based index, the ETFs were built on blue-chip stocks traded on the Shanghai exchange, Mr Liu said. According to Shanghai Securities News, 60 per cent of Shanghai's 412 listed firms paid a dividend last year, which was a rise of 22 per cent from 2002.