SHANGHAI, Sept 8: China has drafted its first set of comprehensive rules on supervising listed firms and is seeking public comment as Beijing aims to build a healthier stock market and pave the way for domestic listing of big state enterprises.

The rules, drafted by the China Securities Regulatory Commission (CSRC) call for closer coordination among government departments, including the CSRC and the People’s Bank of China, the central bank.

The rules aim to address two burning problems facing China’s fledgling stock market: worries over poor corporate governance and insufficient cooperation among government bodies with jurisdiction over the financial markets.

Large Hong Kong-listed firms, such as China Life and China Construction Bank have been listing their shares domestically with Beijing’s encouragement, after a key reform allowing previously non-traded government share holdings to be freely traded within a few years.

“The rules aim to encourage listed companies to improve in quality as they expand, through effective market supervision,” said a statement by the legal office of the State Council, the cabinet, which overseas major regulatory changes.

“They are also propelled by demands of the opening of capital markets and the need to make China’s markets meet international norms,” it said.

The supervision of listed companies is currently governed by several fragmented sets of regulations on specific matters, such as governance and conducting shareholder meetings.

The new rules would order state-run parent companies to make their listed arms independent in terms of assets, finance, management and business, while banning parent firms from infringing on the interests of public investors.

Listed companies would also be banned from corporate activities, such as mergers and acquisitions that damage the interests of the state and public shareholders.

Foreign investors engaging in such activities must abide by China’s laws and regulations, the draft rules said.

The CSRC will be empowered with the main tasks of corporate supervision, including probing possible irregularities by interviewing company officials and conducting spot investigations.

The public will be allowed to comment on the new rules until Sept 24, the statement said.

It gave no date when the rules would be officially issued and implemented, but China’s securities rules are typically promulgated within two weeks after the end of the comment period.

Meanwhile, China’s securities regulator has approved China Construction Bank Corp’s initial public offer of nine billion domestically listed shares in what would be the mainland’s largest stock offering, an industry source said.The source familiar with the deal said CCB, the country’s second-largest lender by assets, hoped to set the price for the sale above the previously indicated range of 5.8 to 6.2 yuan per local-currency A share.

Based on the initial price range, CCB’s Shanghai offer would raise 52.2 billion to 55.8 billion yuan ($6.9 billion-$7.4 billion).

That would exceed the domestic record held by Industrial and Commercial Bank of China, which raised 46.64 billion yuan last October in the Shanghai portion of a simultaneous offer that included Hong Kong.

CCB, which is 8.5 per cent-owned by Bank of America, plans to list shares on the Shanghai Stock Exchange in late September.

China’s bill and bond yields rose across the board after the central bank announced fresh monetary tightening, with the weighted average seven-day repo rate jumping to its highest level since mid-July.

The market had been expecting more tightening, but only after next week’s inflation data or even after a series of major IPOs this month, so it was caught partially unprepared by the 0.5 percentage point reserve ratio hike announced after markets closed on Thursday.

The central bank also issued 151 billion yuan ($20 billion) of three-year special bills -- draining almost as much money as the 180 billion yuan which the reserve hike is expected to absorb.

This week’s tightening may help to establish a higher floor, perhaps of 2.2pc, by the end of this year, some traders said.

China’s trade surplus for August could be the second-biggest on record as a result of robust exports and a tapering off in imports after an oil-related leap in July.

The median forecast of 19 economists polled by Reuters is for a surplus of $25.2 billion, up from $24.4 billion in July and $18.8 billion in August 2006.

An overall retrenchment in exports was unlikely as external demand and global manufacturing both remained solid.

“However, a high base last year has likely biased down the 12-month growth rate. With imports expected to stay largely steady, the trade surplus likely remained elevated in August,” they said in a note to clients. The record monthly surplus of $26.9 billion was set in June.—Reuters