(Yicai) Sept. 19 -- To ensure that investors get a decent and fair return, Chinese regulators plan to revise the corporate dividend rules to encourage listed businesses to start making cash payments or better payments to shareholders, according to the Securities Times.

Companies that do not pay cash dividends or only disburse small amounts will be asked to explain why, the report said today, citing a department head at the China Securities Regulatory Commission. At the same time, the CSRC also plans to rein in firms that pay out beyond their means, it added.

Firms that channel profits into investments will be urged to use assets more efficiently and told to focus on their main business and the return to investors. The watchdog will also encourage more talks between listed companies and regulators so that investors are better informed about dividend payment plans, the report said.

The CSRC will make it easier to pay interim dividends by simplifying the procedures, enabling more frequent disbursements and helping investors to better allocate their funds, and will guide firms to work out cash and stock dividend plans that have more regular payouts, according to the report.

Furthermore, the watchdog will crack down on companies that pay cash dividends in excess of what they can afford to ensure that their earnings are authentic, they have the ability to make such payments, there is no fraud, and they are not raising funds to pay dividends, the report said.

Those firms that have a high debt-to-assets ratio and insufficient cash flow but are still paying steep dividends will be asked to explain if their plans are reasonable and its impact on their business, the Securities Times reported.

The CSRC has been encouraging Chinese mainland-listed companies to increase their dividends and as a result they have risen annually for the past five years to the second highest in the world. They have paid out a total of CNY8.2 trillion (USD1.1 trillion) so far, more than the amount raised through listing.

Editor: Kim Taylor