Fidelity report pulls back the curtain on minority shareholder participation in China

“We may have hit a ceiling for the bottom-up, investor-driven improvements in stewardship practices, and the next phase of development may require clearer top-down direction from regulators,” said Tina Chang, an associate director for sustainable investing at FIL, in an interview. The firm said it had US$925.7 billion of assets under management at the end of September.

According to the study, which covered around 46,000 resolutions at more than 5,000 shareholder meetings for more than 600 mainland-listed firms, the two-year average attendance among minority shareholders rose by 85 basis points between 2020 and 2021 and 2022 and 2023, about half of the 1.67 percentage-point gain from previous years.

The trend could be attributed to reduced growth in minority influence through a decline in ownership concentration, as measured by the percentage of firms with a controlling shareholder owning 30 per cent or more of the shares, the report said.

The stagnating growth in the number of shareholders active in stewardship was cited in the report as another cause, due in part to lower foreign participation. Overseas investors held 8 per cent of the freely floated shares listed on the mainland in 2023, down from 9.5 per cent in 2021, according to data compiled by China International Capital Corp.

A stewardship code – a set of principles for professional asset managers to follow – could be one way improve the participation rate of minority shareholders in mainland-listed companies, Chang said, adding that the idea has been discussed by market participants.