ATTENTIVE TRADERS: Stock market investors check the big board on July 3 in a bourse in Shenyang (LI GANG)

After a nine-month suspension on all initial public offerings (IPOs), China State Construction Engineering Corp. Ltd. (State Construction), the country's largest housing contractor, on July 22 began raising funds of up to 42.6 billion yuan ($6.2 billion) from the public domain. The initiative is the most ambitious in the world to commence in the last year and a half.

One month after China reopened its gate for public listing on June 18, some 11 companies were allowed to float their shares in the Chinese stock markets. More than 400 companies have submitted IPO applications to the China Securities Regulatory Commission (CSRC), a watchdog organization for IPOs, indicating that public listings are gaining momentum.

Recovered confidence

After nose-diving for the better part of last year, the Chinese stock markets are making headway on a gradual basis. The IPO reopening will mean a lot for any continued progress, said Lu Lixin, a researcher at Cinda Securities Co. Ltd. To the economy's advantage, the reopening resumes financial functioning of the capital market, in addition to staying in line with the macro-economic control goal of "expanding domestic consumption and maintaining growth" and meeting Chinese companies' needs of direct financing.

In September 2008, the CSRC ceased public listing, stating that it would commence IPO mechanism reform. The decision led to a halt of the financing function of the capital market. And in the midst of the international financial crisis, when many companies had hoped to raise funds in the capital market by issuing shares, the IPO suspension temporarily put an end to their money-making recovery plan.

The massive stimulus package issued in November 2008 helped stop the Chinese real economy from declining further, Lu said, but the large-scale expansion of bank loans, which helped shore up GDP growth previously, is not sustainable in the long run. The real economic revival, as a result, needs to be backed up by money injection from the capital market, making IPO re-introduction an urgent task.

The IPO reopening shows that the regulatory department is confident about the capital markets. It also means the confidence of companies and investors may be returning, Lu said.

The benchmark Shanghai Composite Index has risen more than 100 percent since the lowest 1,664 points in October 2008, taking the lead in global stock markets. The well-performed stock markets have also laid a solid foundation for the IPO reintroduction.

Previously, financial institutions received the "lion's share" of an IPO, while individual investors were only able to buy newly listed companies' shares on the secondary market. Because the IPO price is a lot lower than its trading price on the secondary market, discontented investors began to speak out against the practice.