Overview
Download: Fidelity International's China Stewardship Report 2024 | Making every step count
Much has changed since 2017 when we first began tracking developments in the Chinese A-share market. We are pleased to report that the landscape has generally shifted for the better - with encouraging moves in regulation and no shortage of inspiring examples of minority shareholders exercising their rights. No longer limited to those leading the charge, stewardship is becoming an integral component of investing for many institutional investors.
Forces for good governance
Over the past three years, regulators overseeing the A-share market have joined forces to foster the high-quality development of listed companies. From amendments to China’s Company Law to changes in regulations by the China Securities Regulatory Commission (CSRC) and stock exchanges, there has been nothing short of an overhaul of rules governing the country’s capital markets.
Two pieces of policy guidance are particularly noteworthy: the Nine-Point Guideline by the State Council – China’s national cabinet – which outlines the principles of governance in capital markets, and guidance from the State-owned Assets Supervision and Administration Commission of the State Council (or SASAC, which oversees central government-owned companies) that focuses on improving the quality of publicly-listed businesses under its purview.[1] The latter sets out requirements to address a number of minority shareholders’ pain points including information disclosure, governance standards, dividend policies, and the reduction of holdings by majority shareholders, all with the intention of improving investor perception and the valuation of listed companies.
Change is happening from within, too. Regulatory reforms have emboldened independent directors at listed companies to hold management teams to account. The introduction of the Measures for the Administration of Independent Directors of Listed Companies in 2023 gave them a boost by raising the bar for the role of independent directors, while strengthening protections for them.[2] With increased awareness of their responsibilities and what’s expected of their roles, we are seeing independent directors becoming more active in demonstrating effective oversight of management teams.
Time and again in the past few years, minority shareholders have made history. For example, candidates nominated by the China Securities Small and Medium Investors Service Center were successfully elected independent directors for the first time. And the first class action for fraudulent issuance on the tech-focused STAR (Sci-Tech Innovation) board closed with 285 million renminbi (USD $40 million) of compensation awarded to over 7,000 minority shareholders.
These developments give us reason to celebrate, but not to be complacent. While there are more minority shareholders attending general meetings among the companies in our sample, that growth has plateaued in recent years. For stewardship to shine and create long-term value in China, it will require the support of all stakeholders in capital markets, from policymakers to institutional investors. The sooner we come together, the better.
The full report consists of three main sections: 1) an overview of trends in shareholder voting; 2) active voting case studies; and 3) engagement case studies.
Download: Fidelity International's China Stewardship Report 2024 | Making every step count
Revisit the 2022 edition of the report
[1] Work Plan for Improving the Quality of Listed Companies Controlled by Central Enterprises (Chinese), May 2022.
[2] Measures for the Administration of Independent Directors of Listed Companies (Chinese), August 2023.
