A THIRD stock exchange in China is ''inappropriate'' because mainland exchanges are still experimental and a guaranteed free flow of market information nationwide has technical limitations. China Securities Regulatory Commission (CSRC) general secretary Zhu Li yesterday said this as he ruled out the suggestion of a third mainland exchange. In recent months there has been a concerted battle between cities such as Tianjin and Wuhan for the honour of becoming the home of the third exchange. In Beijing last week, Professor Li Yining - head of the drafting group on China's securities law - said there was no mention of a third national stock exchange in the new law. However, he said regional exchanges, in concert with over-the-counter trade, would be suggested in the nation's maiden securities law which is due to be released in March next year. Addressing a seminar in Hong Kong yesterday, Mr Zhu said the exchanges in Shanghai and Shenzhen were still only at pilot stage and it would be appropriate to consider a third market only when regulations for the existing two had been perfected. He added that a guaranteed free flow of market information from the two stock exchanges across the country would have to be achieved before a third one was introduced. ''Without a guaranteed free flow of market information, unfairness between different areas in China will occur,'' Mr Zhu said. ''Unless there are major breakthroughs in the two limitations, a third exchange will not emerge.'' On improvements of existing investment environment, Mr Zhu said efforts had been stepped up to strengthen securities regulations, including the expected corporate law and securities law. He said a revision of takeover and acquisitions regulations would be made to the existing chapter of the ''tentative rules'' governing the issuance and trading of stocks, issued in April this year by the State Council. The general secretary also said the exchanges at Shanghai, Shenzhen and Hong Kong would co-operate with each other while maintaining competitiveness, even after 1997. He dismissed a suggestion that Shanghai would be identified as the main venue for listing of major companies instead of Hong Kong after 1997 when its sovereignty was due to revert to China. ''The listing venue will be decided by the companies involved in the listing instead of the commission ,'' he said. On the second batch of mainland companies to list in Hong Kong, Mr Zhu assured territory officials of Hong Kong's position as a main listing venue, although venues such as the US and Europe also would be taken into consideration. He said the companies to be listed mainly would be in the key industries of energy and transport.