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Stock market reforms suggest future success
With the last two companies getting the nod from shareholders last Friday, the 42 pilot firms selected for the second round of share-merger reform have all seen their plans approved.
In the previous round, one of the four pilot companies failed to sell its reform plan, ostensibly due to a lack of flexibility in talks with public shareholders. Not only having more participants but also being more representative of the industrial mix of listed companies, the latest round of reform has gone smoothly thanks to better communication between majority shareholders and public investors. It seems the securities authorities' promise to strengthen protection of the interests of public investors has been kept so far. This suggests implementing a similar share-merger reform plan for the 1,300 companies listed on domestic stock markets has a fair chance of success. But to say the reform programme has worked now is premature. The ongoing reforms that will mean the end of the split share structure, which has crippled China's stock markets in recent years, are long overdue.
Non-tradable shares owned by State and legal entities account for about
two-thirds of all Chinese counters. Their existence has both posed a lingering
threat to a market flooded by cheap shares and undermined public supervision of
majority shareholders.
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