June 15, 2018 / 10:37 AM / a year ago

China's listed firms need to beef up Communist party-building activity, regulator says

FILE PHOTO - An advertising board (L) showing a Chinese stone lion is pictured near an entrance to the headquarters (R) of China Securities Regulatory Commission (CSRC), in Beijing, China, September 7, 2015. REUTERS/Jason Lee/File Photo

BEIJING/SHANGHAI (Reuters) - China’s listed companies must strengthen efforts at “Communist Party building” among other measures to improve corporate governance, the securities regulator said on Friday.

China has been under pressure to boost corporate governance at listed firms as the inclusion of mainland stocks in the MSCI’s emerging markets benchmark on June 1 has put its stock market in the global limelight.

The China Securities Regulatory Commission (CSRC) said listed firms should also take up the responsibility of helping impoverished regions, as it published revised corporate governance rules on its website seeking comment from the public.

The regulator said the rule changes would impose more restraints on the power of controlling shareholders, and better protect the interests of small shareholders.

The revised rules require listed companies to “beef up the work of Party-building and shoulder more social responsibilities, such as contributing to a better ecological system and helping the poor,” CSRC said in the statement.

However, beefing up “Communist Party building” at listed companies, a reference to studying the party’s theories, conducting social activities in line with party doctrine and making rules along party lines, could be seen by some overseas investors and analysts as potentially causing conflict with shareholders.

The presence of party units has long been a fact of doing business in China, where party organizations exist in nearly 70 percent of some 1.86 million privately owned companies, the official China Daily said last year.

The regulator said it had also set up a basic framework for listed companies to disclose environmental, social and governance (ESG) information.

MSCI has said the ESG ratings of China-listed firms are low compared with firms in many other emerging markets, and the U.S. index publisher plans to publish a China ESG index next year.

Reporting by Zhang Xiaochong and John Ruwitch; Writing by Samuel Shen; Editing by Clarence Fernandez

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