Earlier this summer, the China Securities Regulatory Commission (CSRC), the Chinese stock market regulator ­, wrote draft rules that will permit Chinese companies to compensate their employees with incentives such as stock options and warrants.  Companies that are publicly listed in China will be allowed to expend up to 10% of their share equity to issue stock options, shares, and warrants to senior-level managers and executives, board members, and other employees.  Companies must first convert all non-tradable shares into tradable shares before they will be permitted to issue stock options.

It is hoped that linking employees´ compensation to company performance in the form of stock options will serve as an incentive to employees to improve the operation and level of corporate governance in Chinese companies.  This could improve the reputation of Chinese companies and boost the stock market, which has performed poorly in the last few years.  The Shanghai stock index is currently over 40% down from its high in 2001.