Chinese Minister of Finance Xiang Huaicheng said on June 13 that
the reduction of state shares is significant in the following four
aspects:
First, it is an objective requirement for solving the problem of
shortage of social insurance funds and improving insurance system
because part of the capital from the reduced state shares can be
used to pay the social insurance;
Secondly, to reduce part of the state shares may relevantly lower
the proportion of the state shares and make the equity rights of
the listed companies more diversified. This will be conducive to
standardizing the listed companies' operation structure,
strengthening supervision by investment institutions and public
share-holders over the listed companies, therefore making the
behavior of the listed companies more standardized and transparent.
Only when the assets quality of the listed companies is improved
can the capital market develop in a healthier and more stable
way.
Thirdly, the conversion into cash by reducing the state-owned
shares can help amplify the function of the state-owned economy,
raise its controlling, influencing power and driving force, thereby
contributing strategically to the readjustment of the state-owned
economy.
Lastly, by way of reducing the state shares part of the capital can
return to the stock market since it is collected for setting up
social insurance funds which in turn will enter into the capital
market once entrusted to be operated by professional investment
fund management institutions. Along with the establishment and
improvement of the social insurance system, the scope and scale of
the social insurance funds in China will by and by become widened
and realize a positive circulation by dint of market operation.
This is beneficial to the healthy development of the Chinese
insurance market.
(People's Daily 06/15/2001)