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Reuters
Beijing, Nov 5: Beijing plans to bar its troubled international trust and investment firms from securities trading, the major source of income for many of the debt-ridden firms, industry sources and officials said on Thursday.
The ban, part of a sweeping industry reorganisation after last month's collapse of the Guangdong International Trust and Investment Company (GITIC), could be announced as early as this year, the sources said.
"The plan should already be on the agenda and is likely to be implemented by the end of this year or early next year," said a senior official with a Beijing-based ITIC, referring to the ban.
It is widely believed the government will prune to just a few dozen the current 240 ITICs, through mergers and bankruptcies.
The sources said the ban would deal a fatal blow to many smaller ITICs, whose brokerage operations had provided the cash flow to keep them afloat despite growing losses from investments in property and industry.
The move is part of a wider effort to redefine thebusiness scope of ITICs, set up in the 1980s to raise capital for investment in China. But their role has since been bypassed by a growing number of new channels for direct investment.
Other rules were likely to limit the foreign exchange business of ITICs, the sources said, giving no details.
A long-awaited securities law now being debated in the National People's Congress is likely to include provisions to limit ITICs' role in the securities industry.
The complete package of measures would be included in a long-delayed trust law expected to be promulgated next year, the sources added.
"Rules barring free flow of funds between trust and securities businesses are also expected to be enacted by the state," said the Beijing-based ITIC official, who declined to be identified.
The ban would be implemented in stages, along the lines of bank reform over the past several years, he said. It would not exclude ITICs from the rapidly growing mutual fund industry. A central bank official confirmed the plan butdeclined to give a timetable.
ITIC officials said the plan would allow ITICs to retain an investment stake in brokerage operations they spun off. Banks already have been forced to divest their securities divisions, and by the end of this year they will have severed all direct ties with their trust businesses too.
The central banker said the plan to force ITICs to withdraw from securities trading was drafted in 1995, but Beijing delayed implementation for fear of prompting their mass collapse.
Beijing was now more concerned with the financial risks of allowing ITICs to remain in business. "Securities business has been feeding trust and investment business," the central banker said.
GITIC was the second ITIC to be closed this year, after the June shutdown of the once-powerful China Venturetech Investment Corp. Each proved unable to pay maturing debt.
Copyright © 1998 Indian Express Newspapers (Bombay) Ltd.
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