SHANGHAI/HONG KONG May 30 (Reuters) - Chinese listed

companies are rushing to buy back shares and lift dividends as

they respond to regulators' calls that echo reform efforts in

Japan and South Korea, driving a welcome rally even if investors

doubt that broader governance changes are afoot.

China-listed firms announced record cash dividends totalling

2.2 trillion yuan ($300 billion) for 2023 despite a fall in

combined profit, official data shows. Over 100 listed companies

returned money to investors for the first time.

Meanwhile, a growing number of firms are unveiling share

buyback schemes to avoid being delisted or sanctioned with other

penalties under tougher rules.

China's measures, designed to improve investor returns and

announced in March, have triggered a solid rebound in stocks -

the benchmark CSI300 index is up almost 17% from

February's five-year lows.

They have also drawn comparisons with the Tokyo Stock

Exchange's push for capital efficiency that drove the Nikkei to

record highs.

But a Japan-style rally is unlikely as China's reforms have

met with scepticism from fund managers who say it's more about

rescuing the market than improving corporate governance.

Government-controlled companies, which account for roughly

30% of market capitalisation in China and Hong Kong, are under

the tight grip of the ruling Chinese Communist Party, which

could raise conflict of interest issues with non-state

shareholders.

In Japan, firms have begun to unwind strategic shareholdings

as part of ongoing reforms to be more market-oriented.

Returning money has struck a chord with investors who "have

been calling for bumper dividends and more buybacks," said Yang

Tingwu, fund manager at Tongheng Investment.

However, "Chinese companies have a long way to go in terms

of corporate governance," he added. Under China's top securities

regulator Wu Qing, listed companies are pressured to engage more

with investors and improve returns.

This mimics Japan's corporate reform and South Korea's

"Value Up" program, said John Pinkel, partner of New-York-based

hedge fund Indus Capital, which recently added China exposure.

"The common denominator of these positions: they all have

large cash positions, are buying back shares or increasing

dividends, and we like their business models."

PAYOUT

The China campaign has seen many firms arm-twisted to pay

dividends.

Jason Hsu, chairman and chief investment officer of Rayliant

Global Advisors, said that Japanese firms respond well to sticks

and the same strategy works too in China, where regulators hope

to protect retail investors.

Jilin Expressway Co and Fangda Special Steel

Technlogy, for example, didn't intend to pay

dividends, but changed plans to return money to investors

following questioning by the Shanghai Stock Exchange.

In addition, companies including Chongqing DIMA Industry Co

, SafBon Water Service and Infund Holding

Co scrambled to unveil share buyback plans after

warnings by stock exchanges that they could be delisted if their

share prices traded at persistently low levels.

To be sure, concerns linger especially over state-owned

companies (SOEs), who are tasked with social responsibilities

often at odds with shareholder interests.

And while Japan's stock market revival was aided by foreign

inflows, China still faces geopolitical headwinds and global

fund managers remain nervous.

"When it comes to Chinese companies, as a minority Western

investor, you are not top of the priority," said Sunil Krishnan,

head of multi-asset funds at Aviva Investors, London.

"That is just a structural factor that Western investors

have to recognise and accept." Still, as markets price in the

progress investors have pocketed gains.

"The way that I look at Chinese governance is that yes,

there is still a long way for the Chinese to improve and they

are trying to improve it," said Chi Lo, senior markets

strategist at BNP Paribas Asset Management.