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China to introduce accounting standards

(Shanghai Daily)
Updated: 2006-06-02 13:47

China's listed companies will adopt international accounting standards next year and improve their information disclosure in an effort to clean financial markets and attract more investors, an official at the China Securities Regulatory Commission said yesterday, the Associated Press reported.

Hu Bing, deputy director-general of the commission's market supervision department, also said the conversion of Chinese non-tradable shares into tradable ones should be completed by the end of the year.

Hu told an investment conference that the reforms are part of China's current full-scale approach to making its capital markets more efficient, well-governed and up to date with international standards.

The commission closed down or restructured 25 securities firms by the first quarter of this year after finding they had been involved in misusing customers' funds, Hu said.

As of May 15, 919 out of 1,344 listed companies had completed the reform of their non-tradable shares, accounting for 71 percent of China's market capitalization, Hu said.

"It is projected that by the end of the year, the non-tradable shares reform will be finished," Hu added.

Historically, up to two-thirds of stock in China-listed companies was in non-tradable shares usually held by the state. This created a disincentive for investors to pick up the remaining shares.

China halted initial public offerings and other new share listings in April 2005 as it launched a program to shift government owned, non-tradable shares into the market. Last month, it began allowing sales of secondary securities by companies with shares already traded on the Shanghai and Shenzhen exchanges.

"China's regulatory board started systematically looking at the capital markets system" over the last two years, Hu said. "You can't just fix the tire and not the brake."

By the end of April, the number of mutual funds management companies grew to 55, including three which were established by commercial banks, Hu said. The funds under management total 511.5 billion yuan (US$64 billion), accounting for 14.4 percent of overall stock market capitalization.

Hu said Chinese officials are also working on new IPO rules to give strategic investors preferential treatment; updated regulations on mergers and acquisitions to make stock swaps possible; and pilot projects for asset- and mortgage-backed securities.

Regulators also want to deepen the corporate bond market, which is still very small on the mainland, by making the issuance process more efficient. "We call it a turning point for capital markets," Hu said.

On the IPO front, China CAMC Engineering Co. has said it would use funds raised by its June 5 offering to finance several projects, including some overseas. Pricing for the offering is due on June 2. Beijing-based China CAMC, founded in 2001, is an engineering project contractor owned by state corporation China National Construction & Agricultural Machinery Import & Export Corp.