SHANGHAI, July 4 (Reuters) - China has issued a draft of new
rules to get loss-making companies or those in violation of
regulatory practices to delist, in its latest move to improve
stock market conditions.
The China Securities Regulatory Commission (CSRC) published
the draft rules on Friday and is seeking public feedback. It is
not clear when formal rules will be published, but the draft is
typically finalised with modifications within two months.
For the first time, the regulator has offered a variety of
choices for poorly-performing companies to apply for delisting,
giving them preferential treatment such as priority to re-list
if their performance improves. The CSRC outlined the process in
a series of documents on its website, www.csrc.gov.cn.
Companies that are reluctant to delist but fall under the
regulatory conditions to delist will be forced to do so, and
will not be given preferential treatment, the draft rules said.
Those that make false financial declarations in initial
public offerings or earnings reports and companies that post
years of losses or see their share prices close under the face
value of their shares for 20 days, fall into the category.
The CSRC said 78 firms have been delisted from the Shanghai
and Shenzhen exchanges since China allowed for delistings in the
early 2000s for reasons including poor earnings performance.
But since the first delisting of a loss-making company,
Shanghai Narcissus Electrical Co, in 2001, the progress to kick
out poor performers or rule breakers has been slow and has
largely been suspended since 2008 until recently, analysts said.
Among other factors, the slow delisting process was because
of resistance from various parties, including local governments,
to give up their listing resources, analysts said.
Poorly-performing companies were thus allowed to suspend
share trading for years to conduct so-called corporate
restructuring to the detriment of investors.
However, there have been signs that regulators are reviving
the process as China steps up the pace of market reforms since
the country's new leadership took power in November 2013.
Regulators announced in April the delisting of loss-making
shipping company Nanjing Tanker Corp from the Shanghai Stock
Exchange after a five-day grace period, marking the first time
a company backed by the central government was dropped from a
"The draft rules published today reflect improvements
against the previous regulations in many aspects," said Qian
Qimin, head of research at Shanghai Shenyin and Wanguo
Securities. "However, past experiences have shown that in China,
it is more important to force the implementation of rules."
(Reporting by Lu Jianxin and Pete Sweeney; Editing by