China tightens rules on stock market holding cuts to foster market stability

A view of the China Securities Regulatory Commission headquarters in Beijing, China. /CFP

A view of the China Securities Regulatory Commission headquarters in Beijing, China. /CFP

China’s securities regulator unveiled new regulations on Friday aimed at tightening controls over major shareholders’ reductions in holdings within the stock market. The rules are designed to close loopholes that previously allowed shareholders to execute unregulated and indirect reductions in their stakes.

Regarded as the most stringent to date, these regulations will address critical issues in the oversight of shareholder reductions in the A-share market. The China Securities Regulatory Commission (CSRC) has mandated strict pre-disclosure requirements for major shareholders, set limits on the percentage of shares that can be sold every three months, and imposed caps on the sale of shares before a company’s initial public offering.

The measures aim to regulate the actions of large, particularly controlling shareholders, by closing loopholes and stringently preventing indirect share reduction schemes.

“These regulations are expected to guide company executives to focus on long-term growth and enhance corporate governance, thereby improving the overall quality of firms listed on the stock market,” Tian Lihui, dean of the Finance Development Institute at Nankai University, told China Media Group.

With a focus on fostering a rational and value-based investment approach, the CSRC’s latest regulatory enhancements are poised to build a solid foundation for the sustained stability of China’s equity markets, Tian said.