China's Tianjin seeks approval for OTC stock market

By George Chen

BEIJING, March 7 (Reuters) - The northern Chinese city of Tianjin is seeking central government approval to launch the country's first national over-the-counter (OTC) stock exchange, which would expand fund-raising options for small firms.

The proposal, submitted during the annual session of China's parliament this week, would allow non-listed companies to transfer or trade shares under unified supervision by the Chinese securities regulator.

"Tools for direct fund-raising in China are very limited," the Tianjin city government said in a proposal to the State Council, or cabinet, a copy of which was obtained by Reuters on Friday.

"Most companies are still heavily relying on indirect fund-raising from commercial banks, which has caused relatively big risks in the (banking) system," it added.

The city government of Tianjin first applied in September 2006 for approval for a national stock exchange, aiming to join the ranks of China's two other stock market centres in Shanghai and Shenzhen, a boomtown near Hong Kong.

The proposed site of the OTC market, the Tianjin Binhai New Area targeted as a financial and economic centre for northern China, has already attracted billions of dollars in investments from multinational corporations such as Motorola Inc (MOT.N: Quote, Profile, Research, Stock Buzz) and Toyota Motor Corp (7203.T: Quote, Profile, Research, Stock Buzz).

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The plan for an OTC stock market in Tianjin has won strong support from the National Development and Reform Commission, China's top economic planning agency, but still needs final approval from the cabinet, the proposal document said.