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Presumed delay of state-share sale revives stock markets
2002/02/01

Shanghai - Domestic stock markets revived significantly on Thursday, in response to signs that the government will, again, suspend its planned massive sale of state-owned shares.

The stock markets went up after chairman Zhou Xiaochuan of the China Securities Regulatory Commission (CSRC) suggested that the sell-off, announced last weekend, could be suspended in the interest of investors and market stability.
Stock indexes in Shanghai and Shenzhen rose around 7 percent. The trading volume reached 28.48 billion Renminbi (US$ 3.4 billion), the highest since last October, when the state last suspended the sell-off of the shares.

"We will proceed with any reform only under the preconditions of ensuring the stability of the stock market and the protection of investors' interests", Zhou is quoted in the China Daily on Friday.

The chairman of the stock market watchdog further said that market regulation is a long-term issue and gradual process that needs to take into account domestic circumstances, the South China Morning Post reports.

The statements show a government caught between the need to raise money for reforms and the desire to keep the financial markets stable and investors' confidence high.

The controversial plan of the government to sell off state-owned shares, mainly to cash money for projects such as its social security system, caused unrest on the stock markets before. Last year, it got the markets tumbling fast until the state announced a reversal of its policy in October. Recent efforts to put the plan back on track caused new unrest, and it is yet to be seen how long the renewed confidence will hold on this time.

The government is in a catch-22 situation as it does need to sell its shares to finance the pension system that is on the verge of a breakdown.

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