Last week the Ministry of Foreign Trade and Economic Co-operation (MOFTEC) gave its long-expected nod to the listing of foreign-funded companies on domestic stock markets -- a major breakthrough in the opening up of China's stock market.
A notice issued by the ministry stated foreign-funded companies in China can apply for A- and B-share listings, but must get permission from the ministry first.
It is for the first time that the Chinese Government has drawn up a concrete regulation to facilitate domestic listing for overseas-invested companies, opening a new and lucrative channel for their financing in China.
By agreeing to open the home stock market, the country confirmed its vow to advance its opening-up drive by starting to make markets freer within a limited scope before opening-up completely after its entry into the World Trade Organization.
Originally set up to help finance State-owned enterprises, the A-share market raised 150 billion yuan (US$18.12 million) for domestic enterprises last year.
A handful of foreign companies already hold stakes in A-share companies in China, mostly through the purchase of non-tradable stakes held by State-owned institutions.
For foreign investors, issuing their own A shares or B shares means easier access to China's capital market. And it is believed such access will improve the financial strength of overseas companies.
An equal chance for foreign-funded enterprises to obtain access to the home stock market is well in line with China's WTO commitment of national treatment for foreign businesses.
The new regulations certainly show the government's sense of urgency to integrate domestic financial activities with the world economy.
But the more far-reaching influence of this decision lies with its introduction of quality newcomers to the country's stock market.
As an increasingly important growth engine of the national economy, the domestic stock market has helped the country's economic restructuring a lot.
To absorb listed foreign-funded companies, which on average better meet international standards in management, is a wise way to improve the overall performance of all companies in the stock market.
In this sense, the new regulation is also a warning to poorly-performed domestic companies that they should reform quickly, otherwise they will be removed from the home stock market.
(China Daily 07/16/2001)
