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China's securities regulators are drafting rules to let Chinese firms incorporated abroad float shares domestically as early as the second half of this year, state media said on Tuesday.

"Red-chip" firms -- incorporated and listed in Hong Kong but controlled by mainland Chinese shareholders -- will be the first to use the new rules to list in China, the official Shanghai Securities News quoted unnamed industry sources as saying.

But the regulations may eventually also be used by foreign-owned companies to list in China, the newspaper said.

Red-chip listings would help China to meet a key goal of economic policy: expanding its stock market into a major fund-raising source for companies.

In addition, however, regulators may try to use the listings to prevent the market from spinning out of control. The key Shanghai index has more than tripled since the start of 2006.

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