Chinese Minister of Finance Xiang Huaicheng said on June 13 that the reduction of state shares is significant in the following four aspects:

First, it is an objective requirement for solving the problem of shortage of social insurance funds and improving insurance system because part of the capital from the reduced state shares can be used to pay the social insurance;

Secondly, to reduce part of the state shares may relevantly lower the proportion of the state shares and make the equity rights of the listed companies more diversified. This will be conducive to standardizing the listed companies' operation structure, strengthening supervision by investment institutions and public share-holders over the listed companies, therefore making the behavior of the listed companies more standardized and transparent. Only when the assets quality of the listed companies is improved can the capital market develop in a healthier and more stable way.

Thirdly, the conversion into cash by reducing the state-owned shares can help amplify the function of the state-owned economy, raise its controlling, influencing power and driving force, thereby contributing strategically to the readjustment of the state-owned economy.

Lastly, by way of reducing the state shares part of the capital can return to the stock market since it is collected for setting up social insurance funds which in turn will enter into the capital market once entrusted to be operated by professional investment fund management institutions. Along with the establishment and improvement of the social insurance system, the scope and scale of the social insurance funds in China will by and by become widened and realize a positive circulation by dint of market operation. This is beneficial to the healthy development of the Chinese insurance market.

(People's Daily 06/15/2001)