Hartcourt Companies (fka HRCT)

[CABRALEES]

HKSE Wants To Make It Easier For Chinese Companies To Go Public
By Paul Denlinger

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 The Hong Kong authorities are now arguing that the requirements are outdated because many of the Chinese companies seeking to list are private enterprises which have just come up and do not have the long history of Chinese state-owned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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China Business Express did not publish on Jan. 23 and 24 because of technical difficulties. Our apologies for the inconvenience.


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China Business Strategy , a strategic planning consultancy, has helped companies build more than US$3 billion of market capitalization in the China market since 1998.