By staff reporter Fan Junli

(Caijing.com.cn) Shares on Shanghai's too-be-launched international board will be denominated in renminbi rather than U.S. dollars, sources close to regulators told Caijing.

But critics say the decision could doom the board to the same fate of Japan's yen-deonomiated international board, which closed in 2004.

China has been preparing for months to launch an international board on the Shanghai Stock Exchange. Fan Xinghai, director-general of Shanghai' Financial Services Office, said September 14 that one or two foreign companies will be listed on the board in early 2010.

One of the key difficulties in preparing the board has been the question of whether the shares listed there should be denominated in renminbi or U.S. dollar, a source said.

U.S. dollar denominated listings would pose several problems. Overseas' companies' listings would be subject to the approval of more than one government department if their shares were denominated in U.S. dollars. Also, China's closed capital account, which restricts the exchange of local and foreign currency, would pose an obstacle to U.S. dollar listings, the source said.

"Now a consensus has been reached that it is not necessary to denominate foreign companies' shares listed on the domestic market in U.S. dollars," the source said.

His comments were confirmed by a several other sources close to regulators.

Critics argue that denominating shares in renminbi will make it difficult for international investors to trade on the international board.

"We may risk repeating the failure of Japan's international board," one securities industry source said.

Japan's international board, where shares were denominated in yen, had 131 listed overseas companies in 1991. But Japanese investors' enthusiasm towards shares on the international board withered and foreign companies began to delist their shares. Only 32 companies remained listed on Tokyo's international board by 2003 and the board eventually closed in 2004.

Nevertheless, supporters of the renminbi denomination arrangement for Shanghai's international board said the failure of Tokyo's international board could not be attributed to yen denomination. They claim it was caused by the slump in the Japanese economy, the yen's appreciation and the high cost of trading cost on the board.