Anyone would think China’s economy is managed by elderly communists. This week old habits were again on display when the Shanghai Stock Exchange told its listed companies to pay out 30 per cent of income in dividends. The guidelines must be implemented in 2012 annual results. Guo Shuqing, head of the securities regulator, wants to attract more foreign and domestic institutional investors to the mainland market, which still depends largely on money from the man on the street. But the new rules miss the point entirely.

Then again, if would-be investors are complaining that the lack of dividends from Shanghai-listed companies acts as a deterrent, they too are muddle headed. Bigger payouts do not make Chinese stocks one renminbi more valuable. Perhaps these potential shareholders are doubtful about companies’ ability to invest internal capital adequately. Fair enough. But it is current shareholders, not regulators, who should decide how private companies spend their earnings. What is more, China remains an emerging economy, so retained earnings are arguably better spent financing growth capital expenditure than dividends. The dividend payout ratio at companies such as Poly Real Estate, a developer, averaged 60 per cent during the past five years. Never mind that China is urbanising at a clip. In fact, average payout ratios in Shanghai are about 30 per cent, according to the exchange. That is on a par with the S&P 500, which represents a mature market.