Chinese publicly traded companies are paying more attention to their relationship with public investors in recent years, although the change in goodwill is still moving at a slow pace.

According to a Shanghai Stock Exchange report, Investor Relations on the Shanghai Securities Market, as many as 18 firms out of the 1,215 companies that trade shares on the Shanghai and Shenzhen stock markets have launched special columns devoted to investor relations on their Websites as of November last year.

Seven of the 18 also list shares on overseas stock markets where communication requirements with company officials are far more stringent.

"The change has been taking place in a go-slow approach," said Everbright Securities Co analyst Yuan Yufei. "But it is a very positive sign that Chinese-listed companies have started to attach more importance to protecting the interest of small investors and in improving corporate governance."

Since the creation of China's stock exchanges in 1990, it was evident that listed companies were unaware of the need for communicating with public investors, not least small shareholders. The overwhelming majority of public firms, which were formerly state-owned enterprises before restructuring, were still carrying the administrative bureaucracy that was the by-product of the planned economy.

Companies officials were also not motivated to build up a good image among investors as the price movement of shares was not related to compensation packages of senior executives and stock options were still undefined by law.

The ignorance of dividend payouts and corporate disclosures were commonplace among listed firms in the early days of the two exchanges as investors preferred seeking the price gap from the day trading rather than in reading about a company's fundamentals.

Even before launching an initial public offering to the public, companies did not hold roadshows to let potential investors talk directly to executives. This was because the demand for new shares far outstripped supply with the govern-ment keeping the amount of new share offerings under strict control.

During the period from 1990 to 1998, companies received orders from public investors that were about 1,000 times oversubscribed on average, according to Shanghai Stock Exchange statistics.

It was not until 1999 that the first sign of positive change began to emerge when Guangdong Kelon Electrical Holdings Co staged a then-unprecedented roadshow to promote the initial sales of 110 million local currency Class-A shares.

The company did so because of its previous experience of listing shares on the Hong Kong Stock Exchange.

The real driving force that has pressed public companies to improve relations with investors is the advent of the institutional investors, a group much more actively involved in the corporate management than minority shareholders.

At present, China has more than 100 mutual funds that manage combined assets of around 160 billion yuan (US$19.28 billion).

The growing strength of institutional investors has been well- illustrated by the recent postponement of the disputed 10 billion yuan bond sale by China Merchants Bank.

The Shanghai-listed lender did not have its debt sales approved by the China Securities Regulatory Commission and came under a strong backlash from the fund managers who hold a big chunk of the bank's shares.

"It is a trend that listed companies will pay more attention to their corporate image. They will do more substantive things afterwards," said Sun Chao, an analyst with Citic Securities Co.

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