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'A shares' to be open to non-Chinese investors

(Shenzhen Daily)
Updated: 2005-11-07 11:38

China will let foreign investors take stakes in its publicly listed firms by buying their tradable A shares, part of an ongoing plan to do away with nontradable State shares, domestic media reported Saturday.

Foreign companies that want to take strategic stakes in listed Chinese firms will be able to do so by buying their nontradable institutional State shares.

But under the State-share reform plan now being implemented, China is converting nontradable shares, worth a collective US$250 billion, or about two-thirds of the total capitalization of China’s two stock markets, into regular tradable A shares.

Such A shares are now closed to most foreigners.

But as the nontradable shares are eliminated, foreign strategic investors will be able to buy future stakes in Chinese listed firms by purchasing regular A shares, according to major financial newspapers, citing the new policy by the China Securities Regulatory Commission and the Ministry of Commerce.

Foreign investors that take strategic stakes through A-share purchases will be subject to “lockup” periods — specified amounts of time that they must continue to hold the shares before being allowed to sell them — according to the reports.

The new rules will also stipulate that Chinese publicly traded companies with 25 percent or more of their shares held by a foreign investor will enjoy special treatment given to Sino-foreign joint ventures.

If a strategic investor sells some of its shares after a lockup period expires, the Chinese company can still continue to enjoy Sino-foreign joint venture status if the foreign-held stake remains at or above 25 percent.