The Institute of International Finance (IIF) is recommending a series of actions to reduce obstacles in the creation of a good corporate governance environment in China to attract more foreign investment.

The proposals include reducing State ownership in listed companies, enhancing the authority of leading stock exchanges - particularly regarding the enforcement of shareholder protections. It also recommends China develop an institutional investor base and codify civil liabilities for insider trading and other fraudulent activities.

The IIF, whose 330-odd members include the world's key banks, issued its new report on China's corporate governance in Shanghai Thursday.

Victor Chu, chairman and chief executive officer of First Eastern Investment Group, who also played a leading role in the report, said great strides have been made in corporate governance in the past ten years.

"The Chinese authorities understand the importance of international portfolio equity interests in both domestic and offshore capital markets. It is the top priority for them," he told reporters.

The IIF projects that net portfolio equity flows into China this year will nearly double last year's figures and reach a record of US$12 billion. This is in addition to the already high levels of foreign direct investment flowing into China, which the IIF expects will exceed US$53 billion in 2004, US$4 billion more than the 2003 volume.

(China Daily April 16, 2004)