China will increase the number of B-share initial public offerings (IPOs) and allow existing B-share companies to issue new shares, a top securities regulator said.
The authorities will also devise measures to improve access to the hard-currency market for foreign companies.
These moves aim to make the B-share market more lucrative to investors both from home and abroad, Tu Guangshao, secretary-general of the China Securities Regulatory Commission (CSRC), said on Monday at a seminar in Beijing.
He said the recent opening up of B shares to Chinese citizens demonstrated a supportive attitude by the Chinese Government towards the hard-currency market.
The authorities are determined to rejuvenate the B-share market, which was set up 10 years ago for foreign investors, but has lagged behind the domestic A-share market in scale.
There have been only nine B-share IPOs since 1999, which has limited the market's ability to absorb foreign capital.
But the market environment has been improved recently and sentiment is rising, said Tu.
After domestic investors were allowed to trade B shares at the end of last month, more than 500,000 new accounts have been opened and demand has outstripped supply.
Therefore, more good-quality enterprises which need foreign currencies will be allowed to have B-share IPOs, he said.
Existing B-share companies will also be allowed to increase the number of shares.
After China's entry into the World Trade Organization, foreign securities houses will be able to trade B shares directly instead of trading through domestic intermediaries, he said.
The CSRC is also considering whether to allow domestic institutions with legal foreign currencies to participate in B-share trade, though that matter requires more consideration.
Regarding concerns about the impact of the B-share market expansion on Hong Kong's H-share market, Tu said the two counters have different functions and are, in fact, complementary.
He confirmed that the CSRC views the B-share market as an experimental sector before further opening up. Its development could be applied to the A-share market.
But Tu added that the final merger of A and B shares still depends on the process of liberalization of renminbi, which is unlikely in the near future.
Presently, renminbi is only convertible in current accounts and A shares are still within the reach of domestic investors because of foreign exchange controls.
But foreign institutions want to trade A shares. Several others said they want to be listed in China to lower costs for business expansion and to increase their financial strength.
Analysts said foreign companies should be allowed to issue B shares, which will help increase the liquidity of the stock market and attract more foreign investors.
"It will upgrade the structure of listed firms, which have been monopolized by domestic companies,'' said an analyst with Shenyin & Wanguo Securities.
Foreign companies can also set an example for domestic listed firms in corporate governance and operation transparency, she said.
It would ultimately heighten foreign investors' confidence in the domestic market and attract more foreign capital.
(China Daily 03/28/2001)
