HKSE Wants To Make It Easier For Chinese Companies
To Go Public
The Hong Kong Stock Exchange, in a move to attract Chinese
companies to make public offerings in Hong Kong, is discussing
doing away with the requirements that Chinese companies
must have net assets of 400 million yuan and make offerings
of at least US50 million dollars.
Chinese companies which are listed on the Hong Kong market
are widely referred to as H shares. The current requirements
have made it more difficult to attract Chinese companies
to the Hong Kong market following the burst of the Internet
bubble in 2000. Generally speaking, Chinese companies
have preferred listing in New York, leaving the Hong Kong
markets without major new companies in the past few years.
With the new CEPA (Closer Economic Partnership Agreement)
between China and Hong Kong coming into effect this month,
Hong Kong authorities have been lobbying with Chinese
authorities to get preferential treatment. In particular,
they have been pushing for a loosening of Chinese regulations
first announced in 1999. These regulations which were
published by the Chinese Securities Regulation Commission
as "Regulations for Chinese Enterprises Seeking to
Go Public Outside China" and were directed at Chinese
state-owned enterprises. They required that the companies
have net assets of at least 400 million yuan and make
offerings of at least US50 million dollars.
The regulations are more strict than Hong Kong companies
and for Chinese companies seeking to list on China's domestic
A share market in Shanghai. When they were announced,
they were largely directed at state-owned enterprises
seeking to list outside China. The Hong Kong authorities
are now arguing that the requirements are outdated because
many of the Chinese companies seeking to list are private
enterprises which have just come up and do not have the
long history of Chinese state-owned enterprises. In addition,
new private enterprises usually do not have the large
assets which state-owned enterprises have.
Another group which has been pushing for a change in
policy is city and provincial state-owned enterprises.
Many of the smaller state-owned enterprises are having
trouble finding capital, especially since the Chinese
government started squeezing credit in October. Many of
these companies, in fact, are not profitable and are what
Chinese reform-minded economists want to phase out of
the Chinese economy so that new healthier companies with
private boards and management can replace them.
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