The Stop Of Reducing State-Holding Shares: An Exploratory Study

China's stock market has come through thick and thin since theMinistry of Finance announced the Government enactment forco11ecting Socia1 Security Fund by reducing state ho1ding sharesin June 2001, fo11owed by the sharp decrease of the Shanghai andShenzhen stock index, the great discussion of reducingstate--ho1ding shares, and then the stop of reducing state--holdingshares in the interna1 stock market announced by the State Counci1.From a11 these the investors suffered a lot from the po1 icy--maker'smistake. Therefore the investors great1y we1come the correctionsmade by the government. However, we must be very c1ear that it isnot the end of the prob1em of reducing state--ho1ding shares, on thecontrary it is on1y the beginning of reducing state--ho1ding shares.This paper be1ieves that state--ho1ding shares must be reduced inaccordance with economic deve1opment, the reform of corporationgovernance and stock market deve1opment.This paper makes a detai1ed study of reducing state--ho1dingshares and the prob1em of non--tradab1e shares in China's stockfnarket through case ana1ysis, comparison study and experimenta1study, with the hope of finding out the optima1 scheme for so1vingthe prob1em of non tradab1e shares.Section one in this paper brief1y reviews the discussion andthe testing practices of the reduction of state--ho1ding sharessince the Party's congress in September l999, analyses the reasonwhy the Government enactment ---- The Regu1atory Scheme ForCo11ecting Socia1 Security Fund By Reducing the State--Ho1dingShares (Proyisiona1) ---- fai1s to work, and exp1ains the necessityof re--solving the prob1em of state--ho1ding shares and non--tradab1eshares. In this section some basic solutions and princip1es areproposed on the issues of state--holding shares and non--tradab1eshares. Section two makes comparative studies and case--ana1yses ofthe a1ternative so1utions for the prob1em of state--ho1ding sharesoutside the nation, and then sums up the worthy experiences and1essons. Based on the previous two sections of this paper, sectionthree main1y presents a major scheme to so1ve the above prob1emsby transferring state--ho1ding shares and then paying for thetradabi1ity, and for a11 these provides a particu1ar scheme--design;demonstration and comprehensive eva1uation.This paper be1ieves the prob1em of state--ho1ding shares sti11exists by now. Therefore, the author presents a major, workab1escheme to so1ve the prob1em basing on domestic and foreignexperience of reducing state--ho1ding shares, that is, so1ving thestate--ho1ding shares prob1em outside domestic stock market tooptimize the distribution of market resources, and then so1ving thenon--tradab1e--share prob1em in accordance with the improvement ofthe achievements made by the corporations and the furtherdeve1opment of the stock maI'ket.