《中国金融市场 Chinese Financial Markets》补充阅读文献：non-trabable share reform in china's capital market

中国证券监督管理委员会 CHINA SECURITIES REGULATORY COMMISSION Non-tradable Share Reform in Chinas Capital Markets Qi Bin Director Research Center China Securities Regulatory Commission Feb.2007 Hanoi FOR INTERNAL USE ONLY- No portion of this communication may be reproduced or redistributed

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Qi Bin Director, Research Center Director, Research Center China Securities Regulatory Commission China Securities Regulatory Commission Non-tradable Share Reform in China’s Capital Markets Feb., 2007 Feb., 2007 Hanoi

Agenda Non-tradable Share Reform in Chinese Capital markets 1. Chinese Capital Markets 2. Non-tradable share reform 3. Parallel Reforms of chinese capital markets 4. Challenges and initiatives OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Agenda 1. Chinese Capital Markets 2. Non-tradable Share Reform 3. Parallel Reforms of Chinese Capital Markets 4. Challenges and Initiatives

1. Chinese Capital Markets Non-tradable Share Reform in Chinese Capital markets 1990-Shanghai Stock Exchange opened 1991-Shenzhen Stock Exchange opened 1992 -The first B shares were issued to foreign investors 992-CSRC was established 1993-The first H-share company(Tsingtao Brewery) was listed in HK 1993-Company Law was promulgated 1998- The first securities investment fund was launched 1998- Securities Law was passed by the Congress 2001-Domestic investors were allowed to invest in b shares 2002-QFll scheme started off 2003-Securities Investment Fund Law was promulgated 2004-State Council's Instructions Regarding Advancing Reform, Opening and Stable Development of Capital Markets released 2004-The Small Medium Enterprises Board was launched 2005-Notices about Questions Related to the Listing of Non-tradable Shares was issued by the CSRC 2005-Revised Securities Law and Company law were passed by the congress 199019911992199319941995199619971981999200020012002200320042005 Starting off Expansi Clean-up Regulation, Standardization Internationalization OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets 1. Chinese Capital Markets 1. Chinese Capital Markets 1990 - Shanghai Stock Exchange opened 1991 - Shenzhen Stock Exchange opened 1992 - The first B shares were issued to foreign investors 1992 - CSRC was established 1993 - The first H-share company (Tsingtao Brewery) was listed in HK 1993 - Company Law was promulgated 1998 - The first securities investment fund was launched 1998 - Securities Law was passed by the Congress 2001 - Domestic investors were allowed to invest in B shares 2002 - QFII scheme started off 2003 - Securities Investment Fund Law was promulgated 2004 - State Council's Instructions Regarding Advancing Reform, Opening and Stable Development of Capital Markets released 2004 - The Small & Medium Enterprises Board was launched 2005 - Notices about Questions Related to the Listing of Non-tradable Shares was issued by the CSRC 2005 - Revised Securities Law and Company Law were passed by the Congress 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 Regulation,Standardization & Internationalization Starting off Expansion Clean-up

Overview of the markets Non-tradable Share Reform in Chinese Capital markets Number of Listed Companies 1800 1600 1400 1200 1000 600 200 1994199519961997199819992000200120022003200420052006 D Number of Listed Companies(A, B Share) U Number of Listed Companies(B Share)I OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 BINA SECUIRTTIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Number of Listed Companies Number of Listed Companies Overview of the Markets Overview of the Markets 0 200 400 600 800 1000 1200 1400 1600 1800 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Number of Listed Companies(A,B Share) Number of Listed Companies(B Share)

Overview of the markets Non-tradable Share Reform in Chinese Capital markets Mining 9% Transportat Manufacture ion 7% Electricit Inf Real 3% Pu. Tothe驴S1% Finance 38% A-share Market: Full Spectrum of Chinese Economy OR INTERNAL I No portion of this communication may be reproduced or redistributed 中国证券监督管理委员会 CHINA SECUIRITIES EGULATORY COMMISSION

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Overview of the Markets Overview of the Markets A-share Market: Full Spectrum of Chinese Economy A-share Market: Full Spectrum of Chinese Economy Others 2% Public Utility 1% Integrated 2 % Commerce 3% Real Estate 3 % Information Technology 3 % Electricity 4 % Manufacture 28% Finance 38% Mining 9% Transportat ion 7%

2 Non-tradable share reform Non-tradable Share Reform in Chinese Capital markets Background Problems Caused by the Issue Principles and strategies of the reform Progress OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets „Background „Problems Caused by the Issue „Principles and Strategies of the Reform „Progress 2. Non-tradable Share Reform tradable Share Reform

Background Non-tradable Share Reform in Chinese Capital markets The origin of non-tradable share lssue Transition from planning economy to market economy Concerns on state-asset reduction Attempt to maintain state control over listed companies A holding-off approach: shares owned by the state and legal persons not allowed to trade tentatively Non-tradable share issue) Non-tradable shares accounted for 64% of total shares(12/2004 OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Background Background „ The Origin of Non-tradable Share Issue „ Transition from planning economy to market economy „ Concerns on state-asset reduction „ Attempt to maintain state control over listed companies „ A holding-off approach: shares owned by the state and legal persons not allowed to trade tentatively (Non-tradable share issue) „ Non-tradable shares accounted for 64% of total shares (12/2004)

Problems Caused by non-tradable Share Issue Non-tradable Share Reform in Chinese Capital markets Distortion of pricing mechanism of the capital markets Provide no common interest for public and non-tradable shareholders(corporate governance) Failed to evaluate and manage state asset on a market basis created great uncertainties for the market Deviated from international practices Failed attempts(1999 and 2002) OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Problems Caused by Non Problems Caused by Non-tradable Share Issue tradable Share Issue „ Distortion of pricing mechanism of the capital markets „ Provide no common interest for public and non-tradable shareholders (corporate governance) „ Failed to evaluate and manage state asset on a market basis „ Created great uncertainties for the market „ Deviated from international practices „ Failed attempts (1999 and 2002)

Principles Non-tradable Share Reform in Chinese Capital markets Follow the market rules win-win situation Maintain market stability Protect the legitimate interests of investors, especially the public investors No non -tradable share issue for new iPOs Take the reform as an opportunity to promote the capital market in a national level and initiate a series of reforms OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Principles Principles „Follow the market rules: win-win situation „Maintain market stability „Protect the legitimate interests of investors, especially the public investors „No non-tradable share issue for new IPO’s „Take the reform as an opportunity to promote the capital market in a national level and initiate a series of reforms

Strategies Non-tradable Share Reform in Chinese Capital markets Implementing uniform rules, customizing individual solutions: the pricing of the trading right not decided by regulatory authority, but to be decided by negotiation between and among tradable and non-tradable shareholders, and endorsed by 2/3 of the public investors (on average: 3/10 Pilot program to be followed by other companies Other supporting measures and policies: lock-up period and trading restrictions on the selling of non-tradable shares after the conversion Balanced Initiatives: pace of the non-tradable share reform, market stability, other coordinated reforms OR INTERNAL USE ONLY this communication may be reproduced or redistributed ② 中国证券监督管理委员会 CHINA SECUIRITIES E ATDRYCD

FOR INTERNAL USE ONLY – No portion of this communication may be reproduced or redistributed. Non-tradable Share Reform in Chinese Capital markets Strategies Strategies „ Implementing uniform rules, customizing individual solutions: the pricing of the “trading right” not decided by regulatory authority, but to be decided by negotiation between and among tradable and non-tradable shareholders, and endorsed by 2/3 of the public investors (on average: 3/10) „ Pilot program to be followed by other companies „ Other supporting measures and policies: lock-up period and trading restrictions on the selling of non-tradable shares after the conversion „ Balanced Initiatives: pace of the non-tradable share reform, market stability, other coordinated reforms