Monday June 22, 07:18 AM
China tells state firms to transfer shares
SHANGHAI (AFP) - The Chinese government has ordered certain state-run companies to transfer part of their shares to the national pension fund to help it cope with rising numbers of retirees, state media said.
Companies that went public after share reforms kicked off in 2005 must transfer the equivalent of 10 percent of their shares from initial public offerings to the National Social Security Fund, the Xinhua news agency said.
The move was part of efforts to finance the social security system and the retirement needs of the ageing population, the report said, citing a statement posted on the website of the State Council, or cabinet, on Friday.
The new measure will affect 131 domestically listed companies, and applies to any that will list in the future, the report said, citing a separate statement from the Ministry of Finance.
The 131 firms must transfer 8.4 billion shares worth 63.9 billion yuan (9.4 billion dollars) to the pension fund, which must hold the transferred shares for at least three years beyond the usual lock-up periods, the ministry said.
Currently, China's state firms transfer part of their proceeds from overseas initial public offerings to the national pension fund.
Total assets of China's national pension fund declined to 562.5 billion yuan as of the end of 2008 from 569.2 billion a year earlier, as the domestic stock market plunged nearly 70 percent last year.
"It is good news for the fund, which desperately needs capital and support," Xinhua quoted Zhao Xijun, a finance professor at Beijing-based People's University, as saying.
The announcement came only a day after China resumed initial public offerings (IPOs) after a nine-month suspension as Chinese shares have rallied more than 50 percent this year on hopes of an economic recovery.
With the extended lockup period, the new rule is expected to further ease investors' concerns over the impact of a glut of new shares and help the market better absorb the upcoming IPOs.
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