SHANGHAI: China's booming southern city Shenzhen has mapped out plans to allow companies to cross list their shares on the Hong Kong Stock Exchange, according to Chinese media.

The plan, proposed in May, is part of the city's efforts to further strengthen financial ties with neighbouring Hong Kong to better weather the global financial crisis.

The Shenzhen municipal government is awaiting approval for the plan from Beijing, Caijing magazine's website cited Li Lin, director of the Shenzhen Financial Services Office as saying.

If approved, Hong Kong dollar denominated B shares listed on the Shenzhen Stock Exchange will be allowed to list in Hong Kong, while Hong Kong H shares will be allowed to list on the Shenzhen Stock Exchange, the report said.

H shares are those of companies based in mainland China and listed in Hong Kong.

The plan also encouraged so called "red chips" – mainland-controlled companies that are listed in Hong Kong – to list in Shenzhen on a trial basis.

Scholars from Hong Kong and Shenzhen welcomed the proposal, but expressed doubts about its feasibility, the report said.

"It is extremely difficult to supervise red chips because most companies are incorporated outside mainland China like the Cayman Islands, which has no diplomatic ties with China," Wang Shouren, secretary in general of Shenzhen Venture Capital Association, told the magazine.

A Hong Kong Stock Exchange spokesman also said some technical problems, including the convertibility of the yuan, needed to be solved by both sides before cross listing.

"The proposal to allow H shares to list on the Shenzhen Exchange will increase market liquidity and boost trading volumes," Chan Kam-lam, a member of the Legislative Council of Hong Kong, told the magazine.

"But it will face difficulties in the process of application such as the price gap between H shares and A shares," Chan added.


- AFP/so