BEIJING, May 26 (Xinhuanet) -- A week after the newly revised regulations on initial public offerings (IPO) came into effect, China promptly resumed IPO trading, bringing the share-merger reform to its final phase.

    With the publication of its letter of intent yesterday, China Camc Engineering Co Ltd became the first company to start an IPO on the domestic stock markets after the end of the country's year-long IPO ban.

    The securities authorities had suspended all IPOs that could create new non-tradable shares. This step was taken to ensure the transformation of State-owned shares into tradable stocks proceeded smoothly.

    About two-thirds of all Chinese shares used to be State-owned, putting public investors at a disadvantage in terms of supervising the majority shareholders. Such a split share structure resulting from the planned economy has widely been regarded as the major cause of many problems in the market.

    The new IPO signals the resumption of the domestic stock market's key role of fund-raising.

    While overseas listings of key Chinese enterprises and banks have become increasingly popular in recent years, domestic stock buyers have unfortunately been suffering from a lack of new investment opportunities.

    It is time to make domestic stock markets a functioning channel through which public investors can share in the high growth of leading Chinese companies.

    More importantly, yesterday's IPO indicates that the share-merger reform is nearing completion.

    Though some 70 per cent of the around 1,300 domestically listed companies have carried out their plans to make State-owned shares tradable by compensating public stockholders, the result of the share-merger reform remains unclear.

    How the market reacts to new IPOs will determine the success of the stock reform.

    A sharp rise in share prices in recent months has rekindled the hopes of seasoned stockholders attracting tens of thousands of new investors every day.

    Under such circumstances, it is easy to mistake the continuous rise in share prices as a public endorsement of the result of the stock reform.

    The China Securities Regulatory Commission had even said that it would minimize the negative impact of the resumption of IPOs on the stock markets by regulating the number and timing of IPOs.

    However, the real problem remains the quality of IPOs.

    Before the share-merger reform, investors regarded many problematical IPOs as companies taking an opportunity to grab free funds.

    Now, with a resumption of new IPOs, the securities authorities must prove to the investors that they have also assumed the role of more aggressive and accountable market watchdog.

    New IPOs should no longer give companies chances to siphon capital from the stock market. They should mean more opportunities for investors.

(Source: China Daily)