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. Last Updated: 07/27/2016

Chinese to Sell $200Bln of Shares in State Firms

BEIJING -- The Chinese government plans to convert its stakes in 42 major state companies into shares that can be publicly traded and hopes to raise up to $200 billion by selling blocks of stock, state media said Monday.

The step is meant to reduce the government's role in China's struggling stock markets and to make state firms more efficient by eventually selling off stakes to private investors.

Hundreds of state firms have sold shares to investors on China's two stock exchanges. But the communist government retains a controlling stake, and such "nontradable shares" now account for two-thirds of market capitalization.

The government has "limited plans to sell more than $200 billion of government shareholdings in listed firms," the official Xinhua News Agency said. However, it said Beijing would "ensure state control in sensitive sectors," indicating it planned to keep dominant stakes in firms in telecoms and other key industries.

Xinhua reported that companies covered by the latest move include some of China's best-known corporate giants -- Baoshan Iron & Steel, one of the world's biggest steel producers; major electric company Yangtze Power; and financial conglomerate Citic Securities.

News reports did not say when nontradable shares might be put up for sale or who could buy them. Foreigners are barred from owning the main class of shares issued by Chinese companies.

China's government has said for years that it plans eventually to sell most state companies to private investors while retaining control of telecoms and other strategic industries.

Mixed government and private ownership "puts public investors in a worse position than the actual controllers in making corporate policies and disposing of the firms' profits and assets, and has been blamed as one of the major factors for China's sluggish stock markets," Xinhua said.

Prices on China's stock markets in Shanghai and the southern business center of Shenzhen are at their lowest level in nearly eight years.

The news reports Monday identified only a handful of the companies involved in the latest reform.

Baosteel and Citic Securities, regarded as two of China's best-run companies, would have little trouble finding private investors eager to buy their shares.

But most other Chinese state companies, even some major firms, are regarded as poor investments. Four smaller companies took part in a pilot program to sell state shares last month.

Investors have long worried that the release of government shares would flood the market, driving down prices. The pilot program last month fed those fears, setting off the market's latest slide.

One of those firms, Hebei Jinniu Energy Resources, a coal company, said over the weekend that its shareholders on Friday approved a plan to release government-controlled shares to the market.