"Now we believe a better method (for red chips to return) is allowing them to sell A shares directly," Shang Fulin, chairman of the China Securities Regulatory Commission (CSRC), said yesterday.

CDRs "involve a lot of aspects and are more complicated, so we are inclined to adopting a simple and direct plan. That is letting them list on the A share market directly," Shang said when he attended the annual meeting of the National People's Congress, China's top legislature, in Beijing.

CSRC is working with the Hong Kong stock regulator and the city's exchange to arrange the return of red-chip firms, he was quoted as saying.

"It's better for the big-cap enterprises to sell A shares, which local investors are more familiar with, to ensure the success of their mainland issues," said Li Zhi, a Hualin Securities Co analyst. "CDRs are new and a bit hard to be understood for the under-educated mainland investors."

The Shanghai Stock Exchange said last month that it plans to allow the so-called red chips to sell shares on its bourse "soon" as part of efforts to boost the market's size and quality.

Mainland citizens can't buy Hong Kong-listed red chips which are regarded as foreign firms.

Industry analysts said that these red chips could list on the domestic market through setting up a company on the mainland or by issuing CDRs.

China United Telecommunications Group listed in Shanghai in 2003 via setting up a mainland company and indirectly acquiring a controlling stake in the group's Hong Kong-listed unit.

Comparatively, CDRs, similar to American Depositary Receipts, will be certificates issued by financial institutions representing a number of foreign stocks traded on the mainland as local shares.

Red-chip firms, including China Mobile Ltd and PetroChina Co, have reportedly been looking to launch CDRs.

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