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China suspends approving private firms' overseas listing

By Song Hongmei (Chinadaily.com.cn)
Updated: 2007-06-15 16:26

China's securities regulator has suspended approvals for private-owned enterprises to list on overseas stock markets in a move to promote the Shanghai and Shenzhen exchanges, the Shanghai-based Oriental Morning Post reported Thursday.

TheChina Securities Regulatory Commission(CSRC) has suspended approvals since April and, according to an unnamed source in the newspaper, the move is "not so much an official policy as internal guideline".

Mainland-incorporated companies would be allowed to list overseas only if they seek to raise over US$1 billion, according to the "internal guideline".

CSRC doesn't have such a written rule, said a source close to the regulator, but "Chinese authorities indeed look forward to seeing more private enterprises list in Shanghai and Shenzhen."

West Mining Co, based in Xining, Northwest China's Qinghai Province, switched its listing to Shanghai at the end of May from Hong Kong due to a slow approval process and the regulator's "suggestions", the newspaper added, saying that West Mining's Shanghai IPO has won approval from CSRC at the beginning of this month.

Special coverage: Markets Watch Related readings:  Taiwan, mainland firms looking to list receive same treatment  Record number of firms to list overseas  Mainland bourses welcome red chips Shanghai bourse may rank among world's top ten  Lifan switches IPO to Shanghai from HK

Motorcycle maker Chongqing Lifan Holdings also abandoned its Hong Kong listing in favor of Shanghai. The change was because of the current bullish stock market, investors' enthusiasm, and a relatively simple and quick government approval process, which means higher profits and lower expenses, said the company's chairman Yin Mingshan. But he added, "The government encourages fresh injections into the local equity market to promote its sound development."

However, a CSRC official warns there may be some misunderstandings about the approval procedure. "A slow approval process may be caused by some issues. After all, not all applications have to be immediately approved," he explained.

"CSRC doesn't make any changes in its policies supporting enterprises to raise funds in stock markets," said the official. "Given the current domestic market environment, many enterprises hope to list locally. We respect their decisions."

Homecoming journey

To encourage more domestic listings, CSRC would also relax rules allowing Chinese firms incorporated overseas to return to the Shanghai and Shenzhen markets. Relevant drafting rules, which have reportedly been circulated among market players for their feedback, may come into effect on July 1.

So far, 96 H-share companies have listed on Hong Kong's main board while 45 smaller ones are listed on the Growth Enterprise Market (GEM), the second board of the Hong Kong stock exchange.

According to criteria set in the drafting rules ranging from market value to earnings, 21 of the firms would be eligible for domestic listing. Top wireless carrier China Mobile, computer makerLenovoGroup, and oil company CNOOC are expected to be in the first batch to follow that route.

Competing in overseas markets

For years, Hong Kong, the United States and London have been popular destinations for the mainland's State-owned companies to raise funds, especially when the mainland stock market was in a four-year slump.

For example, Nasdaq Stock Market data shows there are now 41 Chinese mainland companies listed on the Nasdaq Stock Market with nine firms listing there last year. The Chinese companies are likely to soon account for the most non-U.S. companies on the Nasdaq Stock Market, said Eric Landheer, Nasdaq's head of Asia Pacific last month.

But the rapidly expanding mainland market after successful securities reforms in 2005 and an injection of cash inflow into mainland bourses are increasingly creating a suitable environment for companies to issueA-shares. On April 10, the total value of the mainland market hit 13.77 trillion yuan (US$1.8 trillion), for the first time exceeding Hong Kong's 13.69 trillion yuan.

To lure more Chinese companies to their markets, world leading bourses including NYSE Euronext, Nasdaq, London Stock Exchange and Deutsche Borse are all preparing to set up representative offices in the Chinese mainland, when regulations that take effect on July 1 allow them to do so.