The country should slow down overseas listings of its large domestic enterprises due to foreign reserve and tax revenue issues, the China Securities Journal reported, citing a State Council economist.

Xia Bin, director of the financial research institute under the Development Research Center of the State Council, said that funds raised by Chinese companies have increased domestic money supply, even though the government is currently trying to lower the growth of such reserves.

Overseas share listings have also reduced the country's tax revenues from stock trading, said Xia.

According to Xia, China's tax revenue from stock transactions tumbled to 10.27 billion yuan (US$1.28 billion) in 2005 from 52.19 billion yuan in 2000.

Xia said that as most of the firms listed on foreign stock markets are flagship enterprises with high profitability, domestic investors are not able to share in the high returns of their businesses.

At the end of 2004, the top 10 overseas listed Chinese firms posted a combined net profit of 235.4 billion yuan, 36 percent higher than the total profit of all the 1,376 listed companies in the Shanghai and Shenzhen stock exchanges.

Xia said that the "strong performance" of these overseas listed companies comes at the expense of spinning off their bad assets and social obligations, the unemployment of millions of workers and huge reinvestment needs imposed by the government.

He said that investor confidence in the domestic stock markets has been weakened because a lot of well-performing large enterprises went public overseas, deteriorating the quality of domestic stocks.

"Instead, China should encourage medium and small-sized enterprises or firms with venture capital investment to get listed on overseas stock markets," Xia added.

(Source: Shenzhen Daily/Agencies)