China says executives of state firms will be judged on stock performance

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Guidelines affect 409 mainland-listed companies with a combined market value of US$3.8 trillion

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Customers at a brokerage in Hangzhou. Photo: CFOTO/Future Publishing via Getty Images

Zhang Shidongin Shanghai

Published: 1:50pm, 18 Dec 2024Updated: 4:16pm, 18 Dec 2024

China said top managers of central state-owned enterprises (SOEs) will be partly judged on their companies’ stock performances and must have plans to revive their shares in times of consecutive or significant declines.

According to a document published on Tuesday by the State-owned Assets Supervision and Administration Commission (Sasac), SOE managers should also promote share repurchases, mergers and acquisitions (M&A) and higher dividends.

The guidelines come at a time when a rebound in Chinese stocks is fizzling out and authorities are eager to boost the values of yuan-denominated shares. Investors have lately been frustrated by a lack of clarity on what Beijing plans to do to support the stock and property markets – as well as the broader economy.

Sasac’s latest guidelines are also a response to the high-level central economic work conference that concluded last week. At the gathering, President Xi Jinping and other top leaders called for a stabilisation in the stock and property markets.

The guidelines affect 409 mainland-listed companies with a combined market value of about 28 trillion yuan (US$3.8 trillion). Some of the largest affected companies are Industrial and Commercial Bank of China, China Mobile and PetroChina, whose ultimate shareholders are the central government. Companies like these trade at a discount to the broader market because investors worry about their growth potential, according to Guotai Junan Securities. They account for about a third of China’s 86 trillion yuan stock market.

“The listed companies controlled by central state-owned enterprises are the main participants that compete in the market and are also an important force in stabilising the capital market,” Sasac said. “We need to have high-quality development as a prerequisite, steadily improve efficiency and profitability and build a batch of first-tier listed companies with solid business performances, strong innovation capability and good corporate governance.”