The success of a concept called the “valuation system with Chinese characteristics” is proving quite the coup for them
The success of the concept—called the “valuation system with Chinese characteristics”—is quite the coup for the country’s state capitalists. It suggests an ability to guide investment flows. First mentioned in November by Yi Huiman, head of the China Securities Regulatory Commission, the system’s principles continue to evolve.
China’s state-owned enterprises have a reputation for poor performance and stingy dividends. Their market valuations have reflected this. Part of the problem, say proponents of the new system, is that companies have communicated poorly with investors. Some have even asked analysts not to cover them. Now the firms should help investors understand their “intrinsic values”, Mr Yi has said.
The biggest beneficiary of the new system may be pensioners. China faces a gaping shortfall in its ability to support the elderly. Poor demographics and an early retirement age are exacerbating the problem. Officials are transferring trillions of yuan in state-owned capital to the national pension fund as part of a reform process. A boost in the valuation of the firms could eventually help the state meet its pension obligations.
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