Home Is Where The Heart Dwells

London Stock Markets Encourage China’s Smaller Firms
from: http://huiylc.com/2008/04/london-stock-markets-encourage-china%E2%80%99s-smaller-firms-270.html

LONDON has become a gateway to Europe for China’s businesses with about 400 Chinese companies investing in the United Kingdom, and with many choosing the capital to host their European headquarters.

China’s economy has gone from strength to strength in recent years. It reported annual growth of 11.9 per cent in the second quarter of 2007, the fastest pace in nearly 12 years. It also has the world’s biggest foreign exchange reserves, worth 1.3 trillion US dollars and growing by one million dollars a minute.

With plans to encourage more inward investment from this rapidly expanding economy, the London Stock Exchange (LSE) is aiming to set up an office in Beijing to encourage more small and medium-size Chinese companies to list on the Alternative Investment Market, the LSE’s junior market.

There are currently six Chinese companies listed on the main stock market, including Zhejiang Southeast Electric Power, Jiangxi Copper and China’s flagship airline, Air China.

In December 2004, Air China listed on the LSE as well as on its own domestic market in Hong Kong. The public offering was aimed at raising about one billion US dollars on the two markets.

Clara Furse, the LSE’s chief executive, said: “We are delighted that Air China has chosen London for its listing outside of China. The London Stock Exchange offers ambitious Chinese companies access to the world’s most international equity market combined with high regulatory and corporate governance standards.”

Air China was able to use a single prospectus for its listings in London and Hong Kong because of the similar regulatory environments in the two financial centres.

Martin Graham, the LSE’s director of market services, said: “Air China’s ability to list in Hong Kong and London using a single prospectus offers a blueprint for other Chinese companies seeking to list overseas and raise international investment capital. We anticipate further companies following their lead.”

Meanwhile, the Alternative Investment Market (AIM) allows smaller companies to float shares on a more flexible regulatory system than that of the main market. There are more than 1,600 firms listed on the AIM; 58 are from China.

An LSE spokesman said: “There is a strong flow of small and medium-size enterprises from China coming to list on the AIM. The office in Beijing will help this process.”

This is not the LSE’s only foray into South-East Asia. It has recently been in talks with Vietnam’s stock exchanges, looking for an agreement to enable London to compete for listings of the country’s biggest government-owned companies.

Henry Chiu, manager of the LSE’s Hong Kong office, said: “Investors on the AIM enjoy several preferential tax policies from the government. This helps them attract a considerable amount of capital and remain stable on the AIM.”

Mr Chiu continued: “After being publicly traded on the domestic market, a lot of mainland Chinese firms currently also choose to float on the Hong Kong stock exchange. We hope in the near future that the mainland-listed firms will go directly to London for dual listing.”

Earlier this year (May 2007), a UK delegation made up of government representatives, market brokers and lawyers went to Beijing to encourage high-growth small and medium-size Chinese firms to list on the UK market. During their trip, the delegation hosted a national conference called, Raising Finance & Investing In The UK. The profile of London as the place to list and source advice and finance for Chinese business has also been raised over the last two years through a programme of seminars and workshops under the “Going Global” brand. These events fronted by the Lord Mayor of the City of London, John Stuttard, and organised by the China Britain Business Council with support from UK Trade & Investment have attracted huge interest and are set to continue during the Lord Mayor’s visit to Beijing, Shanghai, Nanjing in October. The website www.going-global.biz links Chinese entrepreneurs with UK partners.

Lin Wenrun, who works at a medium-size firm selling car decoration materials in south-east China’s Fujian province, went to Beijing to attend the conference. He s aid: “We are planning to float our stock on the market because our business has been growing very fast in recent years, so we are here to see what we can get from a UK listing.”

One company that has already taken the plunge is China Shoto that listed on the AIM in 2005. The firm is one of China’s leading companies responsible for the design, development, manufacture and sale of industrial batteries and power supply systems. It is mainly involved in the production of rechargeable lead-acid batteries that are sold as individual units or as battery systems for a range of industrial applications. It also supplies related products such as chargers, power equipment and battery accessories.

China Shoto is a leading supplier to major Chinese firms such as China Telecom, China Mobile, China Unicom, China Netcom and China Tietong. In December 2005, following the successful placing of more than 4,615,000 new ordinary shares at 130 pence each, the company raised six million pounds sterling in gross proceeds from the placing, giving a market capitalisation on admission to the AIM of 26m pounds.

According to Mr Cao Guifa, chairman of China Shoto, the listing was a natural step in the company’s development. He said: “We are very pleased with the positive response to China Shoto’s initial public offering. We now look forward to using the funds raised from the flotation to take China Shoto to the next stage of growth and to continue to build on the success of our already strong brand and reputation.

He continued: “The funds raised will allow us to increase our penetration of our domestic market and to expand sales overseas. We now look forward to working with our new institutional shareholders and taking the group to the next stage of its development.”

Strong future business links between the UK and China have been further cemented by a five-year agreement between Ken Livingstone, the Mayor of London, and Wang Qishan, the Mayor of Beijing.

The agreement - signed in Beijing in April 2006 - reflects the joint commitment of the two mayors to work together to encourage business links, trade links, tourism, educational exchanges and cultural relations between the two capitals that will benefit both cities.

The mayors also want to encourage cooperation ahead of the 2008 Olympic Games in Beijing, and the 2012 Olympic Games in London. The games will provide additional opportunities to further strengthen relations between London and China.

Mr Livingstone said: “With Beijing at the heart of China - the world’s fastest growing economy - and London, a world leader in financial and business services, we are confident that both our great cities can benefit from closer ties.”

Flying high: China’s flagship airline, Air China, is one of six companies listed on the London Stock Exchange. The LSE expects to set up office in Beijing to attract more small/medium-size Chinese firms to list on the Alternative Investment Market (AIM), the LSE’s junior market. There are 58 Chinese firms listed on the AIM and the LSE seeks to encourage more to follow. (Source: British Consulate-General in Chongqing)

editor： 龙华