The central government won't press ahead with plans to sell state shares in domestically listed firms for the time being due to a lack of an appropriate means to handle the issue, a top official announced yesterday.
Li Rongrong, director of the State-Owned Assets Supervision and Administration Commission. said yesterday that the sale of state-owned shares, which account for nearly two-thirds of the total equities in more than 1,200 public companies, will not go forward until the government finds a way to sell them that protects the interests of both the state and public investors.
"The basic point of selling state-owned shares is to give equal attention and protection to all investors," Li said during a nationally televised press conference in Beijing yesterday morning.
"I have received lots of suggestions on the issue myself, but I do not think that we have found (a method) that is acceptable to all."
Li did say the state-owned assets commission, a new government body that was established in April and oversees state-owned enterprises, will work to improve the profitability and corporate governance of publicly traded companies.
"First we have to better manage state-owned companies, then we will have a proper environment to handle the sales issue," Li said.
While investors have been following the sale issue closely, Li's announcement had little effect on the two stock markets on China's mainland yesterday. The Shanghai stock market inched up 0.26 percent to close at 1343.61, while the Shenzhen stock market rose 0.34 percent to 3227.57.
"The problem cannot be put on hold forever and will be dealt with one day but we still have no idea of what will happen then," said Zhang Qi, an analyst with Haitong Securities Co Ltd.
The government tried to sell state-owned shares in June 2001 to shore up China's underfunded pension fund.
However, the sale sent share prices down nearly 30 percent in three months, forcing the government to suspend the sale.
Li said apart from selling shares, state firms might transfer ownership through mergers and acquisitions with non-state and foreign firms.
Li announced that China Telecom and China Unicom will transfer US$4.3 billion worth of state-owned assets into listed companies by the end of 2003.
China Telecom will inject the assets of its six provincial companies, valued at 33.2 billion yuan, in terms of net assets, into a newly established corporation exclusively owned by the state, and further transfer the assets into a listed company, in terms of net assets, Li said.
Similarly, China Unicom will first inject the assets from nine provincial companies into a state-owned corporation. The assets will eventually be sold to its British Virgin Island-registered company and overseas listed arm. The assets are valued at 2 billion yuan.
"I have received some complaints that the state assets were sold at too low a price. So what we want to do is to put these deals on a better regulated footing to ensure transparency, fairness and openness," he said.
Li also said the government will not set a minimum price for selling state-owned assets to foreign investors.
"We have no such rules," he said, adding any sale price would be set by the market.
(Shanghai Daily November 12, 2003)
