UPDATE 1-China plans to allow banks, other industries to issue preferred shares
* Qualified firms from all industries welcome to apply - CSRC
* Regulator will support banks issuing preferred shares
* CSRC to streamline merger approval process for companies (Adds details, background)
BEIJING, Sept 13 (Reuters) - China is preparing to launch a pilot project allowing companies to issue preferred shares, setting no restrictions on which industries will be able to participate, as regulators move to diversify fundraising channels for Chinese companies.
A spokesman for the China Securities Regulatory Commission (CSRC) told a regular news briefing that the regulator would support banks issuing preferred shares -- a widely expected first step -- but added that any "qualified" Chinese company from any industry would be able to apply.
He did not make clear what constitutes a qualified company.
Preferred shares are a class of equity that has preference over common stock when it comes to dividend payments and asset liquidation, but they ordinarily do not trade, carry no voting rights and do not dilute net profits attributable to other shareholders, and thus have limited impact on the interest of other investors
State media have reported that regulators were considering implementing a preferred shares scheme, as the government begins to open new channels for companies facing tight financing conditions in China's economic slowdown.
The CSRC suspended approval of initial public offerings (IPOs) in late 2012 amid concerns they were diluting market valuations. Brokerages were also concerned that investors were losing interest in equities as a class given higher returns from real estate investment and wealth management products.
But the government has quietly begun to allow listed companies to recapitalise through secondary issuances and private placements, as well as corporate bond issuance.
Central bank governor Zhou Xiaochuan wrote an article in early September arguing that the introduction of preferred shares would help further diversify fundraising channels and wean companies off their traditional over-dependence on bank lending.
An even more popular idea among equities investors has been that the government might convert its own massive holdings of tradeable shares into preferred shares, which would cut the net float on Chinese exchanges and push up values.
The CSRC also said it will streamline the merger approval process for qualified listed companies to increase efficiency. The new approval rule will take effect as of Oct. 8.
Merger and restructuring projects enjoying fast approval would be in nine industries, including automobiles, steel, cement and shipbuilding, where the government is encouraging consolidation to deal with overcapacity, the CSRC said. (Reporting By Shengnan Zhang and Pete Sweeney; Writing by Jonathan Standing; Editing by Jacqueline Wong)
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