Officials rule out compensation for holders of B and H shares China has vowed to accelerate the flotation of non-tradable A shares and aims to complete the process by next spring, but it has ruled out compensation for holders of B and H shares. Over the weekend, two senior Chinese officials urged all listed firms to speed up their plans for the listings to within months. In an announcement posted on its website at the weekend, the State-owned Asset Supervision and Administration Commission (Sasac), the ultimate owner of the state shares, made a similar appeal. The markets were closed over the weekend and have yet to react to the announcements, which reflect renewed official determination to push through the controversial plan. In recent weeks, the stock indices in Shanghai and Shenzhen have stabilised, after an initial fall on the news there would be more listed shares for liquidity to absorb. Huang Huahua, governor of Guangdong province, home to the Shenzhen Stock Exchange, told a meeting on A-share reform in Guangzhou on Friday that listed companies should draw up initial plans to sell their state shares by the end of this month, and that the process should be basically completed within six months. This is the earliest deadline given by a senior official for China's 1,400 A-share companies to win approval from their shareholders for plans to float the non-tradable state shares, which account for up to two-thirds of their total shares. So far, 46 companies have published their plans, with 44 offering compensation to the holders of their tradable shares. On average, they have been offered two free shares for every 10 they hold. In its announcement, Sasac urged all the listed firms to accelerate their reform and diversify their choices of compensation, offering buybacks of tradable shares, calls and warrants. 'Their flotation plans must protect the legal interests of investors, especially public investors. Sasac bodies at all levels must avoid irregularities such as under-the-table transactions, fraud and manipulation,' it said. Zhang Yujun, general manager of the Shenzhen Stock Exchange, told a news conference on Friday that over the next two weeks, his exchange would process all the plans of firms on the second board and up to 10 from the main board, per week. 'Our priority will be those with large market capitalisation, good plans and a strong willingness to reform,' he said. Wu Xiaoqiu, director of the Finance and Securities Institute at People's University, said that of the 1,400 listed companies, 700 accounted for 80 per cent of the capitalisation. Of these, 550 had non-tradable shares. 'I expect the reform to be basically complete by the end of 2006,' he said. The approval of the flotation scheme does not mean that the shares will come to the market immediately. The non-tradable shares will be frozen for at least 12 months and will then be floated only in limited amounts each year, probably a maximum of 5 per cent. Absent from the plans is compensation for holders of B and H shares, the value of whose holdings will be diluted by the sale of the state shares, because they will be floated in the A-share market, and not the B and H-share markets. A total of 30 mainland companies have issued both A and H shares. 'The H and B shares are outside the reform plan,' said Mr Wu, who is also an adviser to the China Securities Regulatory Commission. 'The plan only concerns the A-share market.' In a research report last week, BNP Paribas Peregine said that it expected the flotation process to be relatively smooth, and this would help solve one of the major issues dogging the A-share market. 'Reduced state ownership and control will be conducive to better corporate governance. The flotation of all shares opens the door to various equity-based incentive plans to align management interests with those of shareholders. 'Compensation packages and restrictions on flotation will cushion the impact on the overall market. The market index will slip but A-share holder losses will be protected,' it said.