The plan, which has been discussed by government departments for some time, "will be announced soon after passing necessary administrative procedures", Xiang was quoted as saying.

"But the amount of state assets for reduction will not be big," he said.

Chinese regulators have so far baulked at massive sales of non-tradeable state shares to pay for the under-funded pension system, fearful such a massive sell-off would scare the Shanghai and Shenzhen markets.

"The pension funds shortfall is a problem that has to be solved sooner or later," said Song Guoqing, chief economist for the China Securities Exchange Executive Council.

Analysts said the government could take a gradual approach to selling state stakes on the stock markets to keep investors from becoming nervous.

Last year, China set up a national social security fund aimed at reforming the system, improving pension payments, medical care and unemployment insurance.

Market impact muted

Investors ignored the report of state asset sales as talk of such a move had swirled on the markets for some time and had largely been digested, brokers said.

"Talk about state share listing plans has circulated for a long time," said Huatai Securities analyst Guo Chunyan.

"Investors were also assured by Xiang's remarks that only a limited amount of state assets would be sold."

Most Chinese listed firms are former state-owned companies and have sold only a small portion of their shares to the public.

Shares owned directly by the government or state-owned institutions account for around 70 percent of China's total stock market capitalization - or more than US$400 billion, brokers said.

Listing state shares is bound to divert huge liquidity from existing shares and depress prices, they said.

Xiang was quoted as saying the pension fund would be financed mainly by contributions by employers and employees and state funds. So far the financing amounts to 240 billion yuan (US$29 billion).

(Xinhua 04/30/2001 )