CHINA TAKES SHARE TRADING OFF REFORM AGENDA
China opened its fifth securities market
yesterday, in Tianjin, but share issues and share trading are
no longer on the agenda of economic reform, official newspapers
and Western diplomats said.
    One Western diplomat said share issues are on the
backburner because they are ideologically too sensitive.
    The People's Daily said last month that trading shares is
"not compatible with socialist materialist civilisation."
    The newly opened market traded bonds in four state-owned
firms and buyers outnumbered sellers, the China Daily said.
    China's first securities market since 1949 opened last
August in Shenyang, followed by markets in Shanghai in
September and in Peking and Harbin this year. They trade mostly
bonds.
    "Bonds are all right. There is no risk to the holder and
there is no question of his having any ownership stake in the
firm," the diplomat said.
    The People's Daily article said joint stock companies might
not be the way to reform large and medium-size state firms nor
the model for reforming China's ownership system.
    Share issues would make the workers owning them think only
of the economic advantage of their own firms, rather than the
nation as a whole, the People's Daily said.
    As late as December, officials were pushing the idea of
share issues as a way to channel excess cash in the economy
into production, reduce the state's investment burden and
motivate share-owning employees to work harder.
    In November, Liu Hongru, deputy governor of the People's
Bank of China, told a delegation from the New York Stock
Exchange that a long-term funds market should be built up, "with
stocks and bonds issuance as the main form."
    "Stocks and bonds should be issued through banks, trust and
investment companies ... The transfer of securities should be
conducted through financial institutions ... The opening up of
secondary markets should be studied after trials and
experiments," Liu said.
    The subject of share issues and trading was widely covered
in the official press last year, usually in a positive way.
    One of the most far-reaching proposals came from a Peking
university professor. He said all but essential state firms
should become joint stock holding companies, with the state
holding a controlling share that could be as low as 33 pct.
    The professor argued this would separate government
administrators from managers of the firms, a key goal of
China's reforms. He said his plan would make the companies
independent units under a board of directors.
    The diplomat said the dropping of share issues may be the
result of conservative backlash since the January resignation
of reformist Communist Party chief Hu Yaobang. He said share
issues raise sensitive questions: "What happens if the value
falls? People are not used to this and may be dissatisfied.
What happens if a person gets very rich through share
ownership? The government does not want disparity in income."
    One Chinese journalist said conditions are not ripe for
widespread share issues. "In China, the success or failure of a
firm does not entirely lie within its own hands. There are many
external factors beyond its control," he said. "To make share
purchasing attractive, you need a secondary market and perhaps
speculators," he said. "But speculation is not acceptable in
China."
    Asked if there are political reasons for putting aside
share issues, he said that in China economics and politics
cannot be separated.
    "There is a very major review of the economic reforms going
on. There are political factors involved," the journalist said.
"If the economy runs well this year, the political pressure will
be less."
    Comments by officials of the new Tianjin market echoed his
caution. The China Daily quoted one official as saying China
does not intend to develop stock exchanges equivalent to those
in the West while it has a socialist economic system. "Given the
special circumstances of our country, we must approach the new
phenomenon in a contemplative and comprehensive way so as to
guide trading onto a healthy track," he said.
 REUTER
