State-owned Shares Issues

State-owned stocks is a form of ownership. It originated directly from the reform of our country and has exerted great influence on the economic development. In fact, from the beginning, it has some contradictions with the security market. It not only made the ownership structure unreasonable,the corporation governance imperfect,but also became an obstacle to standardizing security market. So, reducing it is inevitable. However, there are still some disputes on reduction of state-owned stocks. In my opinion, the essential reason is that the circle has not formed a unified recognition on the necessities we reduce state-owned stocks. In order to solve this problem, this article introduces state-owned stocks' origin and inherent contradictions based upon the analysis of its fundamental meaning. Then it puts forward the reduction subject and deeply expounds the necessity and effects of reduction. This article is divided into three sections: Section Ⅰ: Based upon state-owned stocks' meaning , origin and inherent contradictions, this section expounds the meaning of reduction of state-owned stocks, meanwhile, it elaborates the difference between reduction and cash conversion, reduction and circulation. These set up a basis for analysis of its necessity and effects. Section Ⅱ:This section expounds the necessity of reduction of state-owned stocks from three aspects. First, it is from the interior conditions for making the corporation governance perfect. Owership structure is one of the conditions, and it is the basis of corporation governance; second, it is from the exterior conditions for making the corporation governance perfect. An effective market is one of the conditions to perfect the corporation governance, and the emphasis is on cultivating the manager market; Third, it is from standardizing the security market. Section Ⅲ: This section analyzes the effects of reduction of state-owned stocks. The effects include perfecting corporation governance, standardizing thesecurity market and constructing the social security system. First, reduction will influence three parts from corporation and by a series transmitting mechanism improve the corporation governance; Second, reduction will perfect the functions of security market and standardize the security market; Third, reduction will open up a channel for raising money and this has great significance for constructing the social security system.