The Chinese government, due to announce guidelines on the plan shortly, would initially accommodate only the stocks of foreign-owned subsidiaries operating locally, Japan's leading business daily Nihon Keizai Shimbun said.

But it would in future consider letting parent firms of foreign capital list on the markets, in a way similar to the Tokyo Stock Exchange's special section dedicated to shares in companies based abroad, the report said.

Major firms in Japan, Europe and the United States were preparing to have their units in China go public, possibly early next year, the daily reported from Shanghai.

Anglo-Dutch consumer products giant Unilever NV and French telecommunications equipment maker Alcatel have incorporated their units in China as joint stock companies in a step to list them on the local markets, it said.

US photography giant Eastman Kodak Co., British bank HSBC and Hong Kong's Bank of East Asia were preparing to follow suit as were several Japanese companies, market sources said.

In another move to boost the international presence of its capital market, China also planned to open its A-share market, denominated in the Chinese currency renminbi, or yuan, to foreign investors on a gradual basis, the daily said.

China opened up its hard currency-denominated B-share market to domestic investors last February.

The move was part of China's preparations to merge the A-share and B-share markets in the future, the report added.

According to a draft of the listing guidelines, wholly foreign-owned firms in China would be allowed to go public, the report said.

It added that they must retain at least 25 percent foreign ownership if they are to be recognised as a foreign company and therefore eligible for special tax treatment.

They could be listed either on the A-share or B-share markets, the report said.

By listing themselves, foreign companies would be able to procure the Chinese currency at low costs and enhance their name-recognition in China, the report said.

Raising yuan on the stock market was expected to be less expensive for foreign firms than receiving bank loans.

The People's Bank of China has cut interest rates several times since 1996 but the rates which foreign companies pay to borrow yuan were about one percentage point higher than the interest on dollar loans, a Japanese bank official said in the report.

China's stock markets, established in 1990, have been rapidly growing.

The combined market value of the Shanghai and Shenzhen bourses topped five trillion yuan (about 625 billion dollars) this year to overtake that of the Hong Kong market, the report said.

Among stock markets in Asia, it ranks a distant second to the market value of Tokyo bourse's first section worth more than 300 trillion yen (US$2.5 trillion).

(China Daily 09/09/2001)