In order to encourage more Chinese enterprises to secure finance in international capital markets, government departments are currently discussing lowering the threshold for overseas listings, Beijing-based Economic Information Daily quoted a think-tank researcher as saying on Monday.
"As the economy maintains rapid and steady growth, Chinese enterprises are eager to secure finance," said Zhang Hanya, vice president of the China Investment Association and a researcher under the National Development and Reform Commission. "A new round of overseas listing has already been launched and will last for an extended period."
There has been a hot debate on the advantages and disadvantages of an overseas listing. Some have claimed that since high quality Chinese enterprises go for an overseas listing, the domestic stock market becomes weaker.
However, Zhang disagrees with this. He suggests that the overseas listing of Chinese enterprises can be attributed to simpler share issuance procedures, consideration of state-owned enterprises reform and a welcome from foreign securities regulatory commissions.
From January to September, 15 Chinese enterprises were listed overseas. There are now 135 issuing 122.989 billion shares and raising funds of US$72.972 billion. Among them 34 enterprises launched initial public offerings on both the A-share market on the Chinese mainland and H-share in Hong Kong; 101 in Hong Kong; 13 simultaneously in Hong Kong and New York; five simultaneously in Hong Kong and London; and two in Singapore.
Han Ping, vice director of the International Cooperation Department under the China Securities Regulatory Commission, noted that the commission is now undertaking research on this subject and will gradually accelerate the opening-up in capital markets. She added that the Commission is revising related regulations and would continuously support overseas financing.
The main regulations concerning overseas listing are Special Provisions of the State Council on the Floatation and Listing Abroad of Stocks by Limited Stock Companies, Mandatory Provisions for the Articles of Association of the Company to Be Listed Overseas, Notice Concerning An Enterprise's Application for Overseas Listing and Guidelines on the Vetting and Regulation of Applications for Listing on the GEM in Hong Kong by Mainland Enterprises.
As for the threshold, Han said, "It will be discussed jointly with other government departments."
Ren Guangming, chief representative of the Hong Kong Exchange in Beijing, said the Exchange has become an important platform for mainland enterprises to enter international capital markets. Currently the number of mainland enterprises, half state owned and half private, accounted for one third of the total.
The Sarbanes-Oxley Act, which took effect on July 15, has set tougher accounting rules and raised related costs. To secure a listing on the US stock market, a Chinese enterprise has to spend US$5 million more than previously. Because of this, many have started to look at European bourses. It is said that several Chinese enterprises are now negotiating with Frankfurt Stock Exchange for listing.
(China.org.cn by Tang Fuchun, November 10, 2006)