China strengthens delisting rules, but enforcement seen key to success

[Shanghai] China on Friday issued new rules to get loss-making companies or those in violation of regulatory practices to delist, in its latest move to improve stock market conditions, and vowed stricter enforcement of the guidelines.

Traders say market regulations have been too loosely enforced in previous delisting exercises.

The China Securities Regulatory Commission (CSRC) published the rules, effective immediately, after seeking public feedback via a draft made public in July. ) The CSRC "will strictly carry out the new delisting rules, taking effective measures to ensure the delisting of any single firm that fails to meet regulatory standards, so as to protect the seriousness and authority of the delisting mechanisms," the regulator said in a statement published along with the rules.

Seventy-eight firms have been delisted from the Shanghai and Shenzhen exchanges since the early years of 2000 due mainly to successive years of poor earnings, official data showed.

But since the first delisting of loss-making Shanghai Narcissus Electrical Co in 2001, regulators have remained hesitant to kick firms off boards. They largely suspended the process in 2008 and only reactivated it this year as Beijing attempts to revitalise its stock markets.

Chinese stock traders had expected Beijing to pass the new rules, but they warn that technical tweaks mean little until the government surrenders control over the listing process to market forces. REUTERS