The reform of state-owned enterprises into shareholding companies should continue, the Shanghai Stock Exchange said in a report yesterday.

 

The report also encouraged SOEs to seek group listings that can reduce operational costs and raise efficiency.

 

"Group listings help to standardize the management of SOEs as a whole and thus may improve their overall performance," said the report. "Also, it reduces the number of related transactions, cutting costs and raising efficiency."

 

Converting SOEs into shareholding companies is a key step in seeking a group listing.

 

By the end of October, there were 279 SOEs trading shares of branch companies on the nation's two bourses.

 

The market value of the listed arms of these 279 enterprises amounted to more than 4 trillion yuan (US$547.9 billion), making up one quarter of the nation's total stock market capitalization.

 

"To some extent, the potential of these companies decides the quality of China's capital market and its ability to sustain," said the report.

 

In November, Li Wei, vice director of China's State-owned Assets Supervision and Administration Commission, said China encourages qualified state-owned enterprises to conduct group listings under proper occasions.

 

"It is not that all SOEs must be group listed. It should be based on their core businesses and performance. A better way is to conduct listings sector by sector," said Li.

 

Once SOEs are transformed into shareholding firms and issue shares, the listed arm of SOEs can also buy into their parent company and realize a group listing.

 

Still, companies must be aware that the assets poured into the listed companies should be operational assets and group listings should not lower the quality of the listed firm, said the report.

 

(Shanghai Daily January 4, 2008)