According to the new rules released by MOFTEC on Monday, only B-share companies which have posted two successive years of profits are allowed list such stakes.

MOFTEC outlined a total of six precise requirements for the flotation of non-tradable foreign stakes in companies already listed so as to standardize the B-share market.

For example, applications must be based on the condition that the B-share companies have passed annual checks on foreign-invested firms for the past two years and made profits in those years, said MOFTEC's statement, published on its website.

Analysts from Beijing Securities said the conditions aim to slow the departure of foreign investors from the B-share markets after regulators first allowed overseas shareholders to list their stakes two years ago.

Foreign partners of unprofitable companies are now unable to list their shares and flee the market, the analysts said.

According to MOFTEC, the rules took effect immediately, and in combination with supplemental regulations issued last October. Analysts from Haitong Securities believe that the regulation will not have much influence.

China established B-share markets in 1992 to give foreign stock investors a chance to buy Chinese stocks and to allow foreign-invested companies and other firms to list.

In late 2000, China allowed the flotation of formerly non-tradable foreign stakes in those companies already listed for three years.

Many foreign partners then withdrew from the US$13 billion B-share markets, packed with poor-quality firms which had reported consecutive years of losses. Foreign interest has also waned since the market was opened to retail Chinese investors in February 2001, leading to a tripling of prices in three months.

As a result, last October China revised regulations and said foreign partners could not sell their stakes until one year after listing them.

( August 21, 2002)