Chinese listed companies, responding to the call of regulatory authorities, are actively repurchasing shares and increasing dividends. This echoes reform efforts in Japan and South Korea. Despite skepticism from investors about broader governance reform, the market has welcomed a popular rebound.
Official data shows that despite a decrease in total profits, the total amount of cash dividends announced by Chinese listed companies in 2023 reached a record-breaking 2.2 trillion yuan (about 300 billion US dollars), with more than 100 listed companies returning funds to investors for the first time.
Meanwhile, an increasing number of companies have announced stock repurchase plans to avoid delisting or other penalties under stricter regulations.
Measures announced in March by China aimed at improving investor returns have triggered a robust rebound in the stock market—the benchmark CSI 300 Index has risen nearly 17% from a five-year low in February.
These measures have also been compared to the practices of the Tokyo Stock Exchange in promoting capital efficiency and pushing the Nikkei Index to historic highs.
However, because China's reforms are met with skepticism from fund managers, who believe they are more about saving the market than improving corporate governance, a Japan-style surge in the Chinese market is considered unlikely.
In Japan, companies have begun to untangle strategic equity holdings as part of market-oriented reforms.
"Investors have been calling for rich dividends and more buybacks," said Yang Tingwu, a fund manager at Tongheng Investment, adding that returning funds aligns with investor expectations.
However, he added, "Chinese companies still have a long way to go in terms of corporate governance." Under the leadership of Wu Qing, China's top securities regulator, listed companies are required to interact more with investors and increase returns.
This imitates Japan's corporate reforms and South Korea's "value enhancement" plans, John Pinkel, a partner at the New York-based fund company Indus Capital, stated, having recently increased its investment in China.
He said, "The common thread in these initiatives is that they all have substantial cash reserves, are repurchasing shares or increasing dividends, and we are also positive about their business models."
