A Study On Alternative Solutions For Non-tradable Shares In China's Security Market

The equity shares of corporations traded in the China's stock exchange market are purposely divided into two categories :tradable shares and non-tradable shares. This separation of shares badly limits the development of China's stock market. The existence of non-tradable shares brings about a series of problems. For example, it weakens the efficiency of stock market, partly deprives the optimization of resource allocations and impedes the more improvement of the structures of the corporation governance. Recently the settlement of the issue has become one of the most urgent tasks in China's stock market.This paper has detailedly studied the issue of the non-tradabe shares in the China's stock market through case analysis, comparison study and emperimental study,in hope to find out the optimal scheme for solving the problem of non-tradable shares.The section 1 in this paper briefly reviews the discussion and the testing practices of the reduction of the state-holding shares since June 2001.The section 2 includes the background introduction, the basic contents, the reaction and reflection by the market to the Government enactment - The Regulatory Scheme For Collecting Social Security Fund By Reducing the State-Holding Shares (Provisional).The section 3 deeply studys the issue of non-tradable shares and analyzed the necessity and urgency of solving the non-tradable-share problem. In the section we also concluded some basic agreement and principles on the non-tradable-share issue. The section 4 focuses on the brief introduction and evaluation of those Alternative Solutions and Cut-price Solutions for the state-holding non-tradable shares intensively proposed by China Securities Regulatory Commission since January,2002. Based on the previous 4 sections of this paper, the section 5 mainly presents a major scheme to solve the above problem by increasing the buy-back, and of which the particular scheme-design, demonstration and comprehensive evaluation are provided.In this paper we studied the issue of non-tradable shares and presented the optimal design on solving the issue and finally propound our own viewpoints and suggestions on the issue of non-trading shares.