Last week the China Securities Regulatory Commission (CSRC) announced some trial schemes for the sale of State shares, a highly controversial topic in the domestic market.

The trial schemes offer new ideas like selling State shares at their asset value and setting up a special market for the trade of State shares.

But more conspicuous than the content of these schemes is CSRC's promise to take seriously public suggestions for the improvement of these schemes. The cautious gesture shows the commission has learned lessons from its past problems.

The initial State share sales scheme was implemented in June, when CSRC required public firms to sell off State shares worth the equivalent of 10 per cent of the proceeds from their other share issues, despite strong objections in the market.

The market shed about 30 per cent of its value in the following four months as investors feared mass selling of State shares, which make up 70 per cent of all company shares, could swamp the fledgling market.

Many also criticized the scheme as unacceptable because the government insisted that companies sell State shares at secondary market prices that were higher than the shares' value.

CSRC suspended the scheme in October. The day after it announced the decision, nearly all stocks soared 10 per cent, the ceiling for daily price jumps in the market.

The suspension, although it shored up the market at a crucial time, pointed to the inconsistent way the commission administers the market.

It is natural that the scheme stirred huge fluctuations in both indices and psychology because it affected the interests of a wide range of areas in society.

The scheme is important to optimize the governance structure of State firms and fund the social welfare system. It should be carried out to bring about such improvements.

But the problem is the price of the scheme would be extremely high if the market watchdog were to continue to make unpredictable and ill-thought-out moves in the future.

Fortunately, the CSRC seems to have learned some lessons from its previous mistakes. Its seeking for public opinions signals its prudence and modesty, which is the key to avoiding blunders.

It is believed that the final version of the scheme, although still under discussion, will be more carefully considered and more viable than the previous one.

(China Daily December 27, 2001 )