An overview and assessment of the reform of the non-tradable shares of Chinese state-owned enterprise A-share issuers
Material Source: //.Author: Paul B. McGuinness
The “Split Share Structure” reform programme represents a major policy initiative in China and potentially opens-the-door to large-scale state-share disposals. The evidence to date however suggests that the Chinese authorities are primarily concerned with the reconfiguration of the array of share types that presently exist into a prehendible, streamlined form. The various checks and balances imposed on controlling shareholders engaged in the transformation of their shares from non-tradable to tradable form suggest that eventual re-designation of the holdings into an unfettered tradable type will not necessarily translate to the state’s acquiescence in the disposal of such shares. On the contrary, state holdings in the most strategic of assets are likely to be retained more or less intact. Insights are developed by focusing on examples involving major A-share issuers. In particular, a case study of the Sinopec reform proposal of August/September 2006 is set out to help illuminate the principal features of the reform package. Critical examination of the empirical literature relating to the A-share price effects of the share reform programme also features.
There is little evidence to date of significant stock disposals amongst the largest and most strategic of China’s issuers. However, for a number of A-listed issuers, parts of the lock-up moratoria have already expired or are set to do so in the very near future. Given the precipitous fall in A-share prices in Shanghai and Shenzhen since late 2007, largely wrought by the enveloping global credit-crunch, the Chinese authorities have an even pelling case than hitherto to assiduously dampen fears of large-scale state-share disposals. Notwithstanding this, at least a small part of the drop in A-share values during 2008