Reports named China Life Insurance as a possible shareholder in China Construction Bank's new shareholding company set to launch September 21 in preparation for CCB's forthcoming flotation. Analysts said China Life's investment could signal restrictions separating insurance and banking activities could be lifted. Central Huijin Investment, the company set up to hold government bank investments, will be the controlling shareholder. Beijing last year poured US$22.5 billion into CCB, China's third largest bank, and the same amount into Bank of China. Other possible shareholders named in reports include Baosteel, State Grid Corp and China Yangtze Power, the listed vehicle behind the Three Gorges Dam.

Shanghai's stock market urged state firms to slow their march to overseas listings and stay at home to support development of local stock markets, where interest has been slipping in tandem with prices � down 25% over the last three months. Shanghai's stock exchange executive president, James Liu, said he didn�t know of any country which lists its domestic enterprises overseas before listing them at home. He said the list of China's leading companies was finite, noting that more overseas listings by potential blue chips would come at the expense of developing a domestic capital market. Huaneng Power International, China Mobile, China Life Insurance, PetroChina and China Telecommunications Corp all opted to list in Hong Kong over domestic markets. Shanghai's thin population of blue chips includes Shanghai Baoshan Iron & Steel and Yangtze Three Gorges Power Development.

In an astonishing display of protest, staff at GF Securities vowed to derail plans by rival Citic Securities to take over the firm. One source said the action involved 2,230 of GF's 2,500 employees. A-share listed Citic Securities revealed last week that it had launched into negotiations to take a stake in the Guangzhou-based broker. GF staff reportedly fear an employee share plan will be scrapped. In an attempt to quell the outburst, Citic said it did not plan any major changes. Just how GF employees planned to derail the project was not made clear. Regulators believe China is considered over-populated with money-losing brokers and would likely back the Citic plan.

With its China partner in financial trouble, First State Investments� planned mainland fund management joint venture now looks uncertain. After charging Shenzhen-based Hantang Securities with gross irregularities, China Securities Regulatory Commission (CSRC) placed the broker under China Cinda Asset Management, the state-owned restructuring company. First State is a unit of Commonwealth Bank of Australia. Cinda said it would need six months to reorganize Hantang. One client company contends that Hantang has yet to deliver RMB 50 million (US$600,000) in treasury bonds it bought through the broker. First State said its application to create the joint venture had yet to be approved.

Fitch Ratings said China could be overstating results of its efforts to curb lending. Challenging reports that loan growth had slowed to 13.9% in June from 24% in August 2003, Fitch said taking large write-offs and sales of non-performing loans (NPLs) � at Bank of China and China Construction Bank � into account, the adjusted underlying growth rate showed a more modest slowdown to 17.6% in June. Fitch also warned of growing NPL problems, noting deteriorating loan books at some banks, including Shenzhen Development Bank, where NPLs had jumped by 28% in the first half compared to the same period in 2003.