China's stock market regulators - amid concerns that murky issuance dealings will result in the proliferation of unqualified firms - will redouble their efforts to enhance the transparency of the country's share-listing system.

The China Securities Regulatory Commission (CSRC), the industry's watchdog, announced last month its latest move to reform the country's stock underwriting and issuance approval systems will "soon return with fruitful results for the market."

Yi Xianrong, a financial market analyst with the Chinese Academy of Social Sciences, said that will "clearly" be the case.

"Regulators' efforts to enhance information disclosure will strengthen investors' confidence in the overall soundness of listed companies," Yi said.

"In the long run, the market-driven reform will bring the practices of China's stock market regulation in line with international standards."

CSRC on December 26 revealed for the first time the identities of members of its listing committee, which grants approval for corporate initial public listings (IPOs).

The 25-person committee is leaner than its all-powerful predecessor. The previous committee was formed four years ago, and was composed of 80 anonymous members.

"The new committee will emphasize transparency and fairness in the granting process," a CSRC official told China Business Weekly, on condition of anonymity.

All decisions by the committee will be disclosed on CSRC's website, and details of listing candidates will be released to the public, he added.

"Maintaining a balance in the composition of membership is also important," he added.

While most of the 25 members are from within the CSRC, law firms and accountancies, the committee also includes individuals from securities houses and fund management companies.

"Our responsibility is to make sure IPO candidates comply with the listing requirements, and that they are worthy of investors' confidence," Nicole Yuen, UBS AG's head of China equities, told China Business Weekly.

Yuen is the only committee member from a foreign securities firm.

UBS AG was approved last year to invest in China's domestic A-share markets under the qualified foreign institutional investor scheme.

"We will also pay special attention to maintaining and improving corporate governance standards of IPO issuers," she said.

Although the committee's 25 members are classified into part-timers and full-timers, their opinions will have the same weight when approving or rejecting firms' listing applications.

"Full-timers will be more involved in the daily operations of the committee, and will meet more frequently than the part-timers," Zhang Shouwen, a committee member, told China Business Weekly.

Zhang is also vice-chancellor of Peking University's law school.

"But all members will receive equal consideration to sit on the seven-person panel that holds preliminary votes on companies' proposed sales," he said.

Seven members of the 25-person group will form a panel each time they consider a firm's IPO plans.

The panel's votes will be published on CSRC's website. Five votes will be needed for initial approval of firms' IPO plans.

Naming the members of the seven-person panel will give listing candidates the opportunity to request the replacement of a panel member they believe might be biased.

"The authorities have become increasingly aware of the rampant fraudulence of listed companies," Yi said.

They are trying to close loopholes in both their supervisory practices and legislation of stock listing and trading, he said.

Last year's passage of the securities fund law and the pending revision of the securities trading law are among the good signs that authorities will increasingly see investor protection as their top priority, he added.

The securities watchdog recently outlined strict rules for listed companies to disclose information and to report to the CSRC on a regular basis.

But investors wonder how these companies entered the stock market in the first place.

They have been critical of the opaque listing approval process, which they argue should have been more stringent and blocked the listings of unqualified firms.

"The market has long been plagued by the proliferation of unqualified firms, which has increased the risks of stock investing and added to investors' costs," said a fund manager.

"People are eager to see how the new system will work."

The listing committee on December 30 organized its first meeting and voted on the share sales proposal of TCL Corp and BOE Technology Group Co.

The group was composed of two CSRC officials, a division chief at the National Development and Reform Commission, a lawyer, an accountant, an asset assessor and the vice-president of Guosen Securities.

(Business Weekly 01/13/2004 page5)