The China Securities Regulatory Commission (CSRC), on November 9 issued a circular, requiring listed companies to distribute more cash dividends to shareholders in an effort to protect investors' interests.

The regulation would first apply to companies pursuing initial public offerings (IPOs), said Guo Shuqing, who recently took over as CSRC Chairman.

Detailed disclosure of dividend policies and schemes will be a requisite part of all IPO prospectuses in order to enhance transparency of share listing, according to the circular. Those schemes cannot be changed once they are established.

Moreover, the CSRC said it is conducting research and trying to improve the dividend tax policy in order to make the listed companies more willing to repay investors.

"Dividend is an important part of investor returns, and also a deciding factor for share prices," said the commission. "Stiff efforts will be made to tighten supervision over implementation of the new dividend policy."

In China, dividend issuance was mandated only for bonds, not stocks, and the payout decision for stocks is left largely to the discretion of company management.

Data of the CSRC showed China's public firms handed out a total of 500.6 billion yuan ($78.83 billion) in cash dividend in 2010, up from 342.3 billion yuan ($50.91 billion) in 2008. The amount, however, remains far from what investors receive in developed countries.

"The new policy will help boost investor confidence and encourage long-term value investment," said Wang Jianhui, chief economist with the Chongqing-based Southwest Securities Co. Ltd. "But the problem is the CSRC did not clarify what will happen if companies disobeyed the rules."