Global Times recently reported that the China Securities Regulatory Commission issued “Interim Measures” for managing “Share Reductions by Shareholders of Listed Companies.” The purpose of the new rules is to strictly regulate the holding reduction behavior of major shareholders and to effectively prevent “detours” to holdings reductions. The Shanghai and Shenzhen stock exchanges released detailed sets of guidelines at the same time. {Editor’s note: These new restrictions by Beijing, which prevent stockholders from selling their shares under certain circumstances, may be motivated by a belief that these measures will help to prop up China’s stock market and economy.}

The new rules clarified the various circumstances under which shareholding reduction is prohibited. Controllers and controlling shareholders of listed companies are not allowed to reduce shareholdings through centralized bidding transactions or large-scale transactions when the shares are broken (i.e. when the stock price falls below the issue price on issuing day), netted (when the stock price falls below net asset value per share), or when dividends are not up to standard. Controllers, controlling shareholders, and persons acting in concert are not allowed to reduce their holdings within the corresponding period if the listed company is involved in violations of any laws or regulations. Disclosure obligations now include 15-trading-day-ahead disclosure requirement. Shareholding reduction plans should include the number and sources of shares to be reduced as well as the time range, price range, method, and reasons for the reduction, etc. The new rules also include restrictions on the reduction process as well as on major shareholder identity management. The China Securities Regulatory Commission also attempted to plug loopholes where shareholder reduction could happen following a refinancing or a company split-up (a divorce).

China’s benchmark CSI 300 index has lost more than a third of its value since 2020 and is now entering its fourth year of decline.

Source: Global Times, May 27, 2024
https://m.huanqiu.com/article/4Hxnqo39nyY

Chinese dissident Wei Jingsheng shared his view on the causes of the current problems facing China’s real estate market.

In his view, the real estate crisis stems mainly from two factors. The first factor is that the government encouraged rapid, large-scale development, pursuing big GDP figures. The second, more alarming factor is China’s semi-market-economy system. Instead of embracing a full market economy, China uses government directives (rather than the economic data) to guide market activities. This is, in essence, a “planned economy” system.

Xi Jinping’s advisors have come up with two approaches to saving China’s economy, attempting to alleviate excess production capacity. The first approach is to shift the crisis outward, which means exporting surplus production capacity to the world. The U.S. is currently leading the resistance against this first approach. The second approach is to transfer the crisis onto the Chinese people – asking them to spend money on new houses or to replace/upgrade electric appliances.

Source: Radio Free Asia, May 24, 2024
https://www.rfa.org/mandarin/pinglun/weijingsheng/wjs-05242024075707.html