China's market watchdog has drawn up rules to allow non-mainland registered, Hong Kong-listed domestic firms -- known as red chips -- to list on the country's bourses, state-backed newspapers said on Friday.

The proposed regulations -- reportedly circulated to market players -- set criteria from market value to earnings and removed the main obstacle to long-awaited listings by firms from China Mobile Ltd. to CNOOC Ltd. .

An increasing number of such corporations -- including top global wireless firm China Mobile, offshore specialist CNOOC, world No.4 PC maker Lenovo and top retailer GOME -- have said this year they hoped to be among the first batch to list in Shanghai or Shenzhen, once regulations allow.

Among draft rules, a red chip has to be listed in Hong Kong for more than a year with a market capitalisation of at least HK$20 billion (US$2.6 billion), cumulative net income of at least HK$2 billion over three years, the Wen Wei Po and Ta Kung Pao cited the influential Caijing magazine as saying.

At least 50 percent of listing candidates' operating assets or earnings must come from mainland China.

The newspapers said at least 20 firms would be eligible for listing under those criteria.

Under the normal process, market players would consider and offer feedback to regulators on the regulations over coming months, though the China Securities Regulatory Commission would have the ultimate say.

The removal of underlying obstacles in policy and legal areas would help stabilise see-sawing Chinese stock markets, the Ta Kung Pao reported, parroting other local newspapers.

Analysts cite a spate of bullish official comments in state-owned media this week as evidence that Beijing is trying to arrest an equities sell-off, triggered by a tripling of share trading taxes last week.