The central province of Hunan has decided to shelve a plan to sell large stakes in about 30 of its state-owned listed companies. The decision was taken after the central government and the securities regulator warned that the planned public auction in Shenzhen could turn into a disorderly fire sale.
Government entities own about two-thirds of listed state enterprises, with the rest traded on the open market. This fact has raised concerns that such a sale could harm stock prices in general because values would be diluted by the many new shares becoming available. The China Securities Regulatory Commission recently forced Jiangsu province to abandon the proposed sale of state shares in local retailer, Nanjing Xiabai.