China's stock market is not fully ready to embrace overseas-funded firms, although it has long been crying for the milestone opening of China's capital market.

The move to open the previously domestic-investor-only market to foreign investors under the QFII (qualified foreign institutional investors) scheme has been billed as a milestone reform in China's financial market.

The President Group, from Taiwan, and Shanghai-based China operations of Unilever, a Holland-Britain-based multinational daily necessities supplier, are among the companies battling to be the first to capitalize on the QFII scheme.

Both firms are keeping their plans low-key. Both, however, told Business Weekly they had not filed documents for listings with securities regulators.

The companies are waiting for more detailed guidelines, which are likely to be worked out and released this year by top securities regulators.

The Hong Kong-listed China Resource Co last week announced a 51-per-cent- share takeover of a domestic A-share listed company CRJinhua, making it one of the first pioneers of the drive, but there is still no foreign-based companies listed on domestic A-share market.

"We did not kick out any official moves. There is still no detailed guidelines to follow, although the broad map is there," said a senior official in the general manager's office of President's mainland operations in Shanghai.

"But we are busy preparing, and we have already drafted a dozen plans for the planned listing," said the official, who declined to be named.

Earlier reports suggested the food company was set to reshuffle several of its profit-making programmes in the Chinese mainland into one holding company, which would become the first overseas company listed on the domestic A-share stock market.

The company is being coached by Goldman Sachs.

Ministry of Foreign Trade and Economic Co-operation (MOFTEC) released last May regulations to streamline the process foreign businesses must follow to list on the domestic A-share market.

It was considered another signal from the central government that plan was proceeding.

The rules, coupled with provisions released by MOFTEC in 1995 for establishing foreign-funded companies with limited liabilities, removed the legal barriers hindering foreign candidate firms, and boosted foreign companies' hopes of raising funds in the domestic market.

Regulations require foreign companies be reshuffled into shareholding companies with three consecutive years of profits before they are qualified to file documents for a listing in the domestic stock market.

Under the rules, overseas-funded enterprises invested by Hong Kong, Taiwan or Macao firms receive the same treatment as foreign companies.

Unilever, which appears to be aggressively preparing for a listing, said it is in the very early stage in the listing process.

"There are still some detailed policies governing the application left open, and we are still waiting for the release of the rules," said Wu Liang, Unilever's spokeswoman in China.

Listing on China's stock market is Unilever's long-term strategic goal, she told Business Weekly. The company has not filed official applications with top regulators.

"Like our businesses in other markets, localization of capital is part of our localization strategy," Wu said.

Unilever to date has poured US$1 billion into the Chinese market. Its household and personal care products are among the best sellers in China.

Unilever restructured four of its operations in Shanghai in 2000 into a shareholding company.

Seventy-seven per cent of that company is owned by Unilever and 23 per cent is controlled by local Shanghai partner.

Sources suggest the company is one of the most likely candidates of Unilver's operations to list in China.

A source with the Department of Foreign Investment, under MOFTEC, told Business Weekly last week dozens of overseas-funded companies received approval for their shareholding reforms, which they must complete before filing documents to list.

"They are not only firms from Taiwan and Hong Kong, but also firms from Europe and the United States," said the official.

Officials in the department are not drafting detailed guidelines for the much-planned listings.

"I believe the China Securities Regulatory Commission (CSRC) will be responsible for that job," the official said.

"What we have done is help those firms finish their shareholding reforms."