China's two stock markets on Monday unveiled the names of 40 domestically listed firms and their compensation offers to seek the right to float their non-tradable shares, marking the beginning of the country's historic stock market restructuring in full swing.

The companies included Shanghai Automotive and Minsheng Bank.

The move followed the successful state share reform of 46 listed firms since May, which was launched on a trial basis in two batches.

Following years of debate, China decided this year to end the split share structure, which was seen as the major problem in China's stagnant stock market as a large part of the shares were not allowed for trading on the market.

China kicked off the first round of experimental reform of the share structure on May 9. Among the four pilot companies, only Qinghua Tongfang failed to pass its reform proposal due to tradable shareholders' discontent about its compensation plans.

The China Securities Regulatory Commission (CSRC), the national capital market regulator, initiated the second round of reform on June 19, with 42 pilot companies involved.

The split share structure refers to the existence of both tradable shares and non-tradable shares owned by the state and legal persons. Non-tradable shares account for about two-thirds of the shares of the firms listed on the two markets in Shanghai and Shenzhen.

The system, with major shareholders indifferent to price fluctuations, greatly hinders stock transactions and capital allocation.

The split share structure is the key culprit for China's stagnant stock market, and the reform is the "most significant" in China after the nation set up the stock market in the 1990s, said Wu Xiaoqiu, director of Finance and Securities Institute of China People's University.

The reform also concerns the essential management transformation of state-owned assets in China. CSRC statistics showed that a total of 1,377 domestic companies were listed on China's A-share and B-share stock markets, most of them are state-owned ones.

According to the reform proposal, the companies or major shareholders should compensate about three shares per 10 shares to holders of tradable shares so as to make all their shares tradable.

(Xinhua News Agency September 12, 2005)