To the mainland's brightest minds, introducing reforms to float previously non-tradeable shares is seriously flawed and sets a dangerous precedent.
But foreign investors looking to gain access to yuan A-share trading see the attempt to address the market overhang over the past five years as unleashing new opportunities.
Non-freely tradeable shares held traditionally by state-backed shareholders lock up nearly two-thirds of China's total stock market capitalisation. Expectations that the government will have to eventually flood the market with those shares have sent mainland stock indices diving nearly 55 per cent since their peak in June 2001.
Beijing finally relaunched non-tradeable share reform last April. About one-third of the mainland's more than 1,300 listed companies had unveiled plans to convert the locked-up shares into freely tradeable ones by mid-last month.
Encouraged by the progress, authorities announced late last year that foreign strategic investors buying at least 10 per cent of a mainland-listed company which had undergone the non-tradeable share reform could do so without applying to become a qualified foreign institutional investor (QFII) - previously the only way for foreign investors to buy freely traded A shares.
Under the new rule, foreign strategic investors will have to hold their investments for at least three years and meet asset and corporate governance requirements.
