China regulators encourage listed firms to take steps to support markets

BEIJING (Reuters) - Chinese financial regulators encouraged listed firms on Monday to merge, offer cash dividends and buy back shares to support volatile stock markets, a joint statement from four government agencies on the market regulator's website showed.

Beijing is trying to shore up its stock markets, which have tumbled about 40 percent since mid-June on concerns over the slowing economy and a devaluation of the yuan in mid-August.

Monday's announcement was also part of an effort to overhaul its vast but underperforming and inefficient state-owned sector.

The statement, focusing on state-owned enterprises (SOEs), came from the markets regulator, the China Securities Regulatory Commission, together with the Ministry of Finance, the state-owned Assets Supervision and Administration Commission and the China Banking Regulatory Commission.

Beijing hopes that increasing SOEs' exposure to markets and introducing elements of competition will encourage those companies to improve their operations and reduce their burden on the wider, slowing economy.

Monday's statement said banks, as well as securities companies, asset management companies and investment funds, should participate in and provide funding and credit to SOEs for mergers and acquisitions, including cross-border deals. The finance regulators added that decision making for these moves would be decentralized.

SOEs should also increase cash dividends to shareholders, the statement said, and stock buybacks were encouraged to keep share prices high.

Chinese bourses remain at risk of falling on the back of what many experts say was a bubble in the markets earlier this year, fueled by borrowing and by the government encouraging investment.

(Reporting by Paul Carsten; Editing by Hugh Lawson)

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