The State-owned Assets Supervisionand Administration Commission (SASAC), China's state-owned assets watchdog, said Friday that necessary share distributions for the state to have a dominant position must be maintained even after the reform of the share structure of state-owned companies.

The SASAC expressed this attitude by issuing the directive opinions on share structure reform of state-controlled companies on Friday.

The share structure reform involves a large volume of non-tradable state and corporate shares. Currently, only about one-third of the shares in domestically listed companies are floated on the market, which has been blamed as one of the major problems of China's sluggish stock market. The structure puts individual investors at a worse position than the actual controllers of the listed companies.

To change the irrational structure, China launched the reform early in May by experimenting with pilot companies.

According to the opinions, controlling shareholders of state-owned companies should set their minimum share proportion after the reform.

It's a clear message sent to the market that in industries and sectors key to state security and the national economy and in basic or pillar industries of the country, the state will maintainits controlling position for a certain period of time, said a senior official of the SASAC.

As for state controlled enterprises whose business is the majorbusiness of the controlling shareholders or of great significance to the controlling shareholders, the controlling position of the state shareholders should be maintained too, he said.

Therefore, although the state-controlled shares will become tradable after the reform of share structure, it does not mean that all those shares can be sold, said the official.

After setting the minimum proportion, the enterprise must submit the figure to the SASAC for review in line with the specified procedure and disclose it together with the share structure reform plan, said the opinions.

However, the minimum proportion is just the requirement for thecurrent time. With the improvement of the market economy and the deepening of the reform of state-owned enterprises, the figure should be adjusted to the new situation in the future, said the official.

The adjustment means not only that the state controlling shareholders could sell shares in the market. They can also buy shares when it is necessary, he said.

According to the opinions, state shareholders could enhance their controlling position by purchasing shares of their companiesin the capital market.

The official said that to prevent controlling shareholders fromspeculating or insider trading, a strict supervisory system must by established and improved.

There is a clear requirement in the opinions that when an adjustment of the minimum proportion was necessary, it must be performed in line with the market supervision system.

The reform of share structure aims at the long-term developmentof the listed companies and the protection of the legitimate rights and interests of investors, especially individual investors,said the opinions.

Only through the reform on the unreasonable structure which hasbecome a factor impeding the stable development of the country's capital market and the effective allocation of resources, could China see its state-controlled companies play a leading role in the capital market and realize the healthy and long-term development of its capital market, said the opinions.

Source: Xinhua