China’s onshore listed firms predominantly prefer dividends over share buybacks, and are much more receptive to "soft engagement" with institutional investors, according to the latest survey by China Asset Management Co.

The Report on China’s Corporate Governance Practices is commissioned by ChinaAMC and executed by ZD Proxy. Based on a comprehensive survey of 520 A-share listed companies in China, the report systematically maps China’s governance landscape, trying to understand how corporate management perceive “governance” issues, and the drivers behind their preferences. As one of the few in-depth studies focused on China’s corporate governance, this report aims to provide actionable insights for enhancing the quality of listed companies and fostering a sustainable capital market aligned with international standard.

Key findings include:
► A significant majority respondents expect to strengthen their companies’ governance through robust internal controls (77%) such as improving internal administrative rules and amending corporate charters, while 59% prioritize enhanced information disclosure. This reveals a "compliance-driven" ethos among A-share companies, propelled by regulatory guidance and internalization of compliance as a baseline requirement. However, deeper measures essential for substantive checks-and-balances—such as boosting board independence (6%), reducing related-party transactions with controlling shareholder (2%), and regular audit firms rotation (2%)—have yet to receive sufficient attention.

►When it comes to market value management, a key regulatory and corporate priority, approximately 67% of respondents favor high-dividend strategies, primarily in a bid to "attract dividend-focused investors" (60%). In contrast, only 4% prioritize share buybacks. with 37% citing fear of exposure to stock volatility risk, and 33% citing that dividends meet controlling shareholders’ funding needs.

►Equity Incentives: Recognized as vital for governance and talent retention, 48% of firms have implemented or plan to launch such programs within two years. Top motivations include "retaining core management and aligning interests" (89%) and "signaling performance expectations to the market" (55%). However, there is a marked decline in new equity incentives, as the number of such proposals dropped 28% over the past three years.

►Engagement with institutional investors: an overwhelming majority (90%) ofcompanies prefer "soft engagement" with institutional investors such as communication through shareholder meetings, performance briefings, roadshows and on-site visits. A much less percentage(50%) solicit proxy voting. Chinese companies still show limited receptiveness to confrontational measures such as shareholder proposals (9%) or director nominations (4%).

►Discussions with institutional investors remain heavily focused on financial health (84%) and whether the company’s development path dovetails with national strategy(74%), with limited attention to ESG factors like environmental and social responsibility (7%).

The report represents interim findings from a much larger project exploring a full picture of ESG practices among China onshore listed firms. The project extends ChinaAMC’s four-year effort to publish its annual China ESG investing White Paper, underscoring its commitment to ESG and responsible investment.

Click here for the Chinese version of the report.