At a conference in Beijing, he said: "It's an urgent task for the China Securities Regulatory Commission and part of the cash earnings from sales will be continuously used to enrich the social-security reserve."

Zhu said the recent suspension of the sale of state-owned shares was due to pricing and selling methods, which caused consecutive falls on the stock market.

In June this year, the commission announced a plan under which domestic firms would be required to sell their shares in state-owned enterprises. The proceeds were to go to a national social-security fund.

However, the plan to sell off state shares produced more negative effects than expected, according to a senior researcher with the State Information Centre under the State Development Planning Commission.

The researcher, who refused to be identified, said: "The unreasonable pricing and selling methods were the main reasons." State shareholders usually received state shares for 1.5 yuan (18 US cents) or so, while the public shareholders had to pay between 25 and 30 times that price to buy state shares, according to the plan announced in June.

The regulators realized that the sale of state shares was having an adverse effect and they suspended the plan on October 22.

Zhu said: "We will not stop the reduction and sale (of state shares) because that is a channel for the central government to contribute to the social-security fund. "Securities regulators should think of unveiling detailed measures and, at the same time, ensure market stability."

Zhu took his decision taking into account the unfavourable world economic situation.

The global recession will affect China's economy and this, in turn, will bring pressure on the state's social-security system, which relies mainly on the state's tax income, according to Zhu.

He made the remarks at a three-day conference of the National Council for the Social-Security Fund, a high-ranking body set up in September to operate the fund.

The fund derives partly from the proceeds of sold state shares as well as money allocated by the central government.

The main component of the social-security fund still comes from employees and their employers.

(China Daily December 18, 2001)