With the growth of the listed companies, the footstone of the securities market,  providing shareholders with rational investment returns not only demonstrates the listed companies’ fulfillment of the shareholders’ entrusted duties, but also meets the inherent needs of the securities market’s sound development. According to the “Company Law of the People’s Republic of China”, the companies’ shareholders have rights including asset income, and the boards of directors and the shareholders’ meetings are entitled to formulate and approve profit distribution schemes. Distribution of cash dividend, an important method for the listed companies, provides a channel for investors to gain reasonable investment returns. Due to the imperfect governance mechanisms, some listed companies have, with less initiative and weak control in the dividend payment, offered shareholders little dividend or even failed to do so. The China Securities Regulatory Commission (CSRC) has, for a long time, promoted and instructed the listed companies’ payment of cash dividend, by perfecting the dividend payment mechanism for the fundamental market system.

According to the “Administration Measures for New Shares’ Issuance by Listed Companies” released by the CSRC in March 2001, the securities companies shall, as the main underwriters, pay close attention to the refinancing application by the listed companies whose boards of directors make no relevant explanations on failing to pay dividends for the past three years. Moreover, in line with the “Administration Measures on Securities Issuance by Listed Companies” promulgated in 2006, the listed companies’ issuance of new shares shall be consistent with following provision: “The accumulatively distributed cash or stocks in the recent 3 years shall not be less than 20 % of the average annual distributable profits realized in the 3 years.” Besides, as required by the regulations in the CSRC’s annual reports, listed companies, making profits during the reporting period with no scheme of cash profit distribution, should justify the usage and usage plan for the undistributed profits.

Thanks to the long-term efforts made by regulatory authorities and market participants at all levels, the listed companies have made progress in cash dividend payment, characterized by the following 3 features: firstly, an increasing number of listed companies have paid their cash dividend year after year. Specifically, listed companies with the number of 621, 698 or 779 paid cash dividend in 2005, 2006, and 2007 respectively (each accounting for 45%, 48% and 50% of all the listed firms); secondly, the listed companies have expanded their distribution scale in cash dividend. According to the statistics of the 2007 annual reports, a total of 779 listed companies (accounting for 50% of all the 1,558 listed companies) paid RMB275.7 billion cash dividend in total (accounting for 29% of all the RMB948.3 billion net profits), and 148 listed companies (accounting for 9.5% of all listed companies) paid bonus shares. Over the past 3 years, the sum of cash dividend has hit records high from 2005 to 2007, with the amount of RMB72.9 billion, 116.3 billion and 275.7 billion respectively; thirdly, despite the gap of domestic listed firms’ dividend payment ratio compared with that on the overseas markets, more and more listed companies have taken part in dividend payment. As for the proportion of dividend distribution to the net profits, listed companies in Britain, Japan and Hong Kong have taken out about 40% to 50% of their profits for dividend payment, while domestic listed firms have paid 30% or so as cash dividend in recent years. Concerning the total number of dividend payers, more than 50% listed companies in Britain, Japan, Germany and France have paid dividend in cash, and the same is true of the domestic listed firms.

According to a recent CSRC survey on cash dividend payment, some listed companies, devoid of sustainable and stable systems for cash dividend, have no transparent policies to distribute the profits. The CSRC has, by perfecting systems and reinforcing instructions, encouraged the listed companies to establish long-term dividend payment policies, with an aim to promote the policies of cash dividend for shareholders. Therefore, the CSRC has drafted the “Notice on Amendment in Regulations for Listed Companies’ Cash Dividend”, whose main points are as follows. Meanwhile, the CSRC intended to solicit public opinions concerning the “Measures”.

Firstly, the listed companies are required to unveil their policies on cash dividend in detail while submitting the annual reports, to set up a transparent cash dividend policy and provide investors with information related to the companies. Specifically, the listed companies, capable of distributing profits in cash but having failed to do so, should justify the usage plan for the undistributed profits, to enable the investors to grasp the future outlook of the companies. Moreover, as for the content of annual reports, the listed companies should attach the historical data of their cash dividend for comparison, through which investors can find out the previous data of dividend distribution.

Secondly, the listed companies should consummate their corporation rules by stipulating the policies on cash dividend payment and covering their long-term arrangements, qualifications, proportion as well as varieties in the cash dividend policies. The listed companies will thus standardize their dividend allotment and establish a sustainable policy on cash dividend distribution requiring strict enforcement.

Thirdly, the listed companies are permitted to distribute cash dividend every six months, whose financial accountant reports can escape being audited by the accounting firms

Fourthly, the listed companies applying for refinancing should increase their cash dividend payment. Specifically, corresponding amendment will be made to the “Administration Measures on Securities Issuance by Listed Companies” as follows: profits distributed in cash or in stocks by the refinancing companies shall not be less than 30 % of the average annual distributable profits realized in the recent 3 years.

In recent years, under the guidance of the “Opinions of the State Council on Promoting the Reform, Opening and Stable Growth of Capital Market”, achievements have been made in setting up the securities market’s fundamental systems, giving full play to market function, optimizing the structure of the listed companies as well as the investors, and standardizing market operation. However, we should also recognize that China’s capital market has, with many in-depth problems unsettled, remained to be “emerging and transitional”. There is still a long way to go for a sound and healthy securities market. Therefore, in the next period, the CSRC will continue to enhance the securities market’s fundamental systems, instruct and encourage the listed companies to pay cash dividend, with an aim to establish a system of listed companies’ cash dividend payment suitable for China’s national conditions. Moreover, the listed companies should abide by laws and regulations. Regulatory authorities will severely deal with violations of laws and regulations such as malicious cashing-out and excessive allotment by dividend distribution.