The Application Policy On The Problems Caused By Shareholder Structure Reform

The equity markets, the most important component of the capital market, can provide capital assurance to manufacturers and companies of an economy. However, as the shares of the companies listed in China's equity markets, due to historical reasons, were divided intentionally into two parts: tradable and non-tradable ones, the functions of these markets had been distorted in pricing, resource-distributing and value-creating, and the non-tradable state shares had become the Achilles heel of China's stock market that hindered its development since the first bourses opened more than a decade ago.On April 29, 2005, China Securities Regulatory Commission (CSRC) set in motion the trial reform aiming at transferring the non-tradable state shares into full-floating ones. Shang Fulin, Chairman of CSRC, pointed out that the reform was irrepealable. His comments revealed the courage and the resolution of the government to deal with the tremendous obstacle and to push for a more sustainable and healthy development of the equity markets.Focusing on the historic reasons and current problems in the shareholder structure, the author of this article analyzed some practical examples in theoretical measures and found out that the manipulation of the prices of individual stocks would be unavoidable or could be even worse. As the conclusions of this article, some effective suggestions to the application of policies are put forward to prevent the securities market from being manipulated.