China's securities regulator is trying to give minority shareholders of listed companies more say in their companies' major decisions and more chances of achieving returns.

In a draft document released on its website late on Sunday, the China Securities Regulatory Commission (CSRC) said that public shareholders of listed firms should actively participate in voting about major events of the firms.

Issues that have a major impact on the interest of public investors, such as new share sales, convertible bond issuance, major asset restructuring and overseas listing of subsidiaries, would have to obtain approval from more than half the public investors attending a vote.

The document, which aims to give small investors better protection of their interests, is an implementation of reform measures proposed in a February State Council declaration to bolster China's capital markets development.

The document is open for public consultation until October 15. CSRC says it will make amendments if public opinion warranted and then formally enact the document.

The draft also highlights the role of independent directors for the protection of small investors and supervision of listed companies' operations.

It also enhances the responsibilities of listed firms on information disclosure and profit distribution.

"Listed companies should put the method of profit distribution in their corporate guidelines... if the board does not make a plan to distribute profit to investors in cash, the company has to explain the reason and independent directors have to give their opinions," the rule says.

For companies whose funds are misused by a major shareholder, the CSRC will decline to accept any re-financing application until the misbehavior is corrected.

Analysts say the new rule will, to some extent, enhance market confidence and urge listed companies to do a better job, though lack of concrete standards and punishment for rule-breakers might weaken its effect.

The existence of a large volume of non-tradable State and legal person shares in domestic listed companies puts the small investors who hold tradable shares at a disadvantage. Their interest is often eroded by big shareholders and investment sentiment is also affected.

Experts have been calling for stronger protection measures to repair market confidence that has remained weak because of the stock market's lacklustre performance.

"I think the issue of the new draft rule is only the beginning of the implementation of the State Council declaration. More stimulating policies should come out later on," said Duan Wei, an analyst with Guangzhou Securities.

However, Tian Xiaolin, a researcher with the Chinese Academy of Social Sciences, said that greater efforts are needed to cure fundamental problems with the bourses and really improve market efficiency.

Regulators should enhance supervision on the listed companies on their use of funds and sustained profitability, he said.

"Listed companies are using the public's money, so they should use it well and give investors returns," he said, "Regulators should enhance supervision on that."

Meanwhile, the reform measures should not just be a way to stabilize stock indices, but run steadily.

(China Daily September 28, 2004)