I
THE L I S T I N G OF CH INESE ENTERPR ISES I N
O V E R S E A S STOCK M A R K E T S
by
L E U N G CHUI-WA
- i M B A PROJECT R E P O R T
J
j Presented to
•i I
I The Graduate School
I •I
In Partial Fulfillment
o f the Requirements for the Degree o f
M A S T E R OF BUS INESS A D M I N I S T R A T I O N
THREE-YEAR M B A P R O G R A M M E
THE C H I N E S E U N I V E R S I T Y OF H O N G K O N G
May 1995
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。丨i UNIVERSITY A^vy
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A P P R O V A L
Name: Leung Chui-Wa 、,
Degree: Master o f Business Administration
Title o f Project: The Listing o f Chinese Enterprises in
Overseas Stock Markets 、
( D r Dennis Fan )
Date Approved: J l^ i/M^ \ ， :
4 •
l i
；• • •
ABSTRACT
The objective o f this M B A project is to understand the background, policies and the
current status o f the listing o f China state-owned enterprises in overseas stock
markets. It is hoped that the findings o f this project can shed light on the role the
Hong Kong stock market will play in China after the resumption o f Hong Kong's
sovereignty in 1997.
Overseas listing o f China enterprises is more than a means for foreign capital raising.
It is closely related to certain important developments in China. They include the
reform o f China state-owned enterprises, the development o f the China securities
market, the increasing participation o f China in the international economic arena and
the resumption o f Hong Kong's sovereignty.
Due to its importance to the future prospect o f China economy, the Beijing
government develops tight policy control on the listing o f the China enterprises
overseas, particularly in the selection o f enterprises and listing venues. Stock
exchanges worldwide all wish to benefit from this trend o f overseas listing o f China
enterprises. Among the exchanges. Hong Kong and the US are the two major listing
venues so far recognised by the China government.
iii
A close examination on the regulatory regime, offering mechanism, and market
characteristics o f the stock markets in Hong Kong and the US suggested that, despite
its relatively small market scale, the Hong Kong stock market can better fit the needs
o f China enterprises for overseas listings. Trading performance o f the China stocks so
far listed in the two markets provided strong support to this arguement.
However, Hong Kong has to prepare for the next round o f competition as being the
listing venue for China enterprises. After 1997, it will become a part o f China's capital
market. Instead o f being a venue for overseas listing. Hong Kong will compete with
other China cities for the domestic listing o f China enterprises. Shanghai is identified
as the most important competitor Hong Kong needs to ensure that its many existing
market characteristics, such as openness, flexibility and high efficiency，will be
retained after 1997. Also, it needs to continue to enhance its market infrastructures
and the professionalism o f its market practitioners so as to become a world-class stock
market for China.
«
iii
TABLE GF CONTENTS
ABSTRACT • 11
TABLE OF CONTENTS iii
LIST OF TABLES
A C K N O W L E D G E M E N T vii
Chapters
I I N T R O D U C T I O N 1
Purpose o f the project 2
Scope o f the project 2
Methodology and literature review 2
n . B A C K G R O U N D OF OFFSHORE L ISTING OF CH INA 5
ENTERPRISES
Reform o f China state-owned enterprise 5
Development o f China securities market 8
Capital needs o f China 11
China's participation in global economy 12
China's resumption o f Hong Kong's sovereignty 13
m O V E R V I E W OF OFFSHORE L ISTING OF C H I N A ENTERPR ISES……15
China policies over offshore listings o f China enterprises 15
Overall policy 16
Selection o f State-owned enterprises for offshore listings…•. 17
Selection o f listing venue 19
V
Competition among stock exchanges worldwide 20
Australia 2 i
Canada..... 22
London 22
Singapore 23
Tokyo 24
IV. L ISTINGS OF CH INA ENTERPRISES IN H O N G K O N G 26
A N D THE UNITED STATES
Current situation in Hong Kong and New York 26
China enterprises listed in Hong Kong and New York 28
Hong Kong 28
New York 30
Important issues for consideration 32
Regulatory regime 32
Offering mechanism 36
Market characteristics 38
Advantages and disadvantages o f listing in Hong Kong and the US.. .39
V T R A D I N G PERFORMANCE OF H SHARES A N D H/N SHARE ADRS . . .41
Scope and methodology o f the analysis 41
Findings 42
Discussion ^^
VI. D ISCUSS ION A N D CONCLUS ION 4 7
Implications on SOEs and China economy 4 7
Implications on the Hong Kong stock m a r k � 50
APPENDIX 34
B I B L I O G R A P H Y 72
iii
LIST OF TABLES
Table 1 Key Statistics o f the Chinese Stock Exchanges 1 0
Table 2 Key Statistics o f the Stock Exchanges in Hong Kong 27
and the US
Table 3 H Shares Listed on the SEHK 29
Table 4 H /N Share A D R s Listed on the N Y S E 32 、
Table 5 Trading Liquidity o f China Stocks Listed on Hong Kong • 4 3 and New York Stock Exchanges
Table 6 Percentage o f Trading Days with Closing Below the Issue... 44
Price
iii
LIST OF TABLES
Table 1 Key statistics o f the Chinese stock exchanges 10
Table 2 Key statistics o f the stock exchange in Hong Kong 27
and the US
Table 3 H shares listed on the SEHK 29
Table 4 H /N share ADRs listed on the N Y S E 32
Table 5 Trading liquidity o f China stocks listed in Hong Kong and … . . 4 3
New York stock exchanges
Table 6 Percentage o f trading days with closing below the issue price … 4 4
iii
A C K N O W L E D G E M E N T
The Acknowledgement section is considered by the author as the most difficult part o f
the whole project paper. There are too many people who have contributed，directly or
indirectly, to the completion o f this project. Without their encouragement, support and
assistance, the author would not be able to survive this hard process. Special thanks
are given to Joyce L i , the first reader o f this paper, for her kind comments on its
contents and presentation.
The author is especially indebted to the following individuals for their support and
constructive comments:
M s Iris Cheung, Stock Exchange o f Hong Kong.
M r Paul Chow, Stock Exchange o f Hong Kong.
M r Cai Hong-ping,. Shanghai Petrochemical Co Ltd
M r Stephen Cheung, Peregrine Capital Ltd.
D r Dennis Fan, Chinese University o f Hong Kong
M r Fang Han-ping, Yizheng Chemical Fibres Co Ltd.
M r Meocre Li , Arthur Anderson •
M r Nei Quin-ping, The China Securities & Regulatory Commission
M r David Sun, Ernst & Young
M s Essie Tsoi, Stock Exchange o f Hong Kong.
M r Wong Wai-ming, H S B C Corporate Finance Ltd
Last but not least, the author is grateful to Stephen Rive, her former boss and a friend
at present, who advised and encouraged her to take an M B A program.
• 1
t
C H A P T E R I
I N T R O D U C T I O N
The listing o f Tsingtao Brewery，a People's Republic o f China (PRC) state-owned
enterprise, in Hong Kong on 15 July 1993 was a historic event. To China, this
successful offshore listing experience opened a new horizon o f its capital market
development. It offered not only a low-cost and efficient channel to foreign funds, but
also a valuable learning process for its yet mature capital maiicet. To Hong Kong, the
listing was a milestone and a turning point in the course o f the development o f its stock
market: shifting from an overwhelming Hong Kong focus to a China concept. The
presence o f thousands o f potential listing candidates in China immediately released
Hong Kong from the problem o f shortage o f local issuersV More importantly, it
created a niche for Hong Kong's stock market in the competition against other stock
markets.
However, the worid is full o f competition. Growing investor interests in China made
the b u ^ e s s o f listing China enterprises extremely attractive to stock ^changes around
the world. Hong Kong found itself facing strong competition from major exchanges in
North America, Europe and Asia-Pacific. Among the many offshore markets, the New
York Stock Exchange is regarded as the real competitor to Hong Kong in this respect,
given its reputable international status and access to enoimous funds.
1 The Way Forward - the consultation paper. The Stock Exchange of Hong Kong. March 1994.
2
Purpose o f the Project
This project was conducted in light o f increasingly intense competition between Hong
Kong and other stock exchanges to become the most appropriate capital market for
China. It aims to study the background and practices o f offshore listing o f China
enterprises, with special emphasis on the competition between Hong Kong and the
United States.
The findings are expected to shed light on the future development o f China's policies
governing overseas listing as well as the strengths and weaknesses o f Hong Kong and
the U S in serving China's capital needs. This in turn will provide hints on what role
Hong Kong will play being a capital market for China after 1997.
Scope o f the project
The scope o f the project covers the following areas:
• issues leading to the development o f overseas listings o f China enterprises;
• competition among overseas stock exchanges to be the listing venue o f China
enterprises;
• China's policies o f offshore listing;
• Current status o f China enterprises' listings in Hong Kong and the US; and
• Advantages and disadvantages o f listing in Hong Kong and the US.
Methodology and literature review
Given the short history o f the offshore listing o f China enterprises, limited academic
research on the subject is available. Chan, N g and Poon (1989)2 explored the
參
3
possibility o f listing China enterprises in Hong Kong. They were positive that this
practice would bring much benefits to both China and Hong Kong. They believed
that, "with the continued role o f Hong Kong as a conduit for foreign capital,
technology and investment in China, it is a natural trend for P R C enterprises to seek
listing on the Stock Exchange o f Hong Kong in order to tap funds more effectively and
directly", (p.8, Chan, N g and Poon, 1989)
Nevertheless, they pointed out that there exist many obstacles in the course o f such
promising development, including the absence o f company laws and securities laws in
China^ the differences between the accounting systems in Hong Kong and China, the
concerns o f the autonomy and quality o f China enterprises' management, the lack o f
the investor confidence towards China stocks, the difficulty in pricing China enterprises
due to the problems arising from asset evaluation, ownership and the inconvertibility o f
Renminbi.
They concluded that,
"In light o f the difficulties faced by P R C enterprises in compliance with the
listing rules laid down by the Stock Exchange o f Hong Kong，we think that it is
not the time for direct P R C enterprises listing in the Stock Exchange o f Hong
ICong. ••…and instead "it is highly suggested that these P R C enterprises be first
listed in the Sh^izhen Stock Exchange. As discussed，the Shenzhen Stock
Exchange is very similar in organisation and operation to the Stock Exchange o f
Hong Kong as well as in other aspects." (P.97)
Many obstacles mentioned by Chan, N g and Poon remain unsolved today. But they
can no longer keep China enterprises from listing in Hong Kong. Thanks to the efforts
2 Kin M ^ Chan and Man Leung, NgandM. R , Poon, A Study of Listing PRC Enterprises in
Hong KotiR Stock Exchange (Thesis MBA, Chinese University of Hong Kong, 1989)
4
of the Stock Exchange of Hong Kong and market practitioners in Hong Kong as well
as China securities officials.
Despite the limited academic studies, plenty of relevant speeches or presentations
made by market practitioners were found. These materials must be interpreted with .
. great caution since they were not produced by independent and objective parties. In
fact most of them were put forward by people with strong vested interest and
produced mainly for commercial purpose .
Other than desk research, a number of individual interviews were conducted for this
study. Valuable infonnation and insights were collected from the following
individuals:
• Mr Nei Quin-ping, deputy manager of Overseas Listing Department, the China
Securities & Regulatory Commission;
• Mr Fang Han-ping, Company Secretary ofYizheng Chemical Fibres Co Ltd;
• Mr Cai Hong-ping, Company Secretary of Shanghai Petrochemical Co Ltd;
• Mr Stephen Cheung, Director of Peregrine Capital Ltd;
• Mr David Sun, Partner ofEmst & Young;
• Mr Wong Wai-ming, Deputy Managing Director of HSBC Corporate Finance Ltd;
• Mr Meocre L~ Partner of Arthur Anderson.
Trading data of the 15 H shares and two N shares since their first listings were
obtained from the Stock Exchange of Hong Kong and commercial information vendors
for analysis.
5
CHAPTER TWO
BACKGROUND OF OFFSHORE LISTINGS OF CIDNA ENTERPRISES
During the study, a view repeatedly being put forward to the author was that any study
on the offshore listings of China enterprises must be conducted in the context of the
refonn of state-owned enterprises ("SOEs") in China. In turn, study on the SOEs
reform must be examined in the context of the economic reform in China since 1979.
This is very true. The origin, objectives, process and result of offshore listings of
China enterprises are all closely related to the economic reform.
This chapter looks at some issues leading to the emergence of offshore listings of
. China enterprises. They are the refonn of SOEs in China, the development of China
securities market, the capital needs of China, China's participation in the global
economic arena and China's resumption of Hong Kong's sovereignty in 1997. An
appreciation of these issues is vital to the understanding of the current and future
developments of such policy.
Refonn of State-owned Enterprises in China
One of the problems facing China in the development of its economy is the low
economic efficiency of SOEs. Being a communist country, most ifnot all key
industries in China are run by SOEs. Their p~rformance directly affects the national
outputs and the pace of development of the whole country. Unfortunately, SOEs in
6
China are generally found suffering from low operational efficiency and poor
management. To tackle the problem, China introduced a reform among SOEs in
1979.
M r Qu-miao Fan in his essay "State-owned Enterprise Reform in China � Incentives
and Environment"^ gave detailed description o f the reform. He divided the reform into
three stages.
The initial stage (1979 -83) emphasized several important experimental initiatives with
the intention to enlarge SOEs autonomy and to expand the role o f financial incentives
within the context o f the traditional planning system. For instance，SOEs were allowed
to produce and sell extra-quota products, to retain part o f the profit for own
development and to offer performance-related bonuses for employees. These
measures promoted profit-oriented behavior by SOEs and released their energy from
tight social planning.
The second stage (1984 - 86) contained measures to expose SOEs to market forces in
their output-related decision-making process alongside the traditional planning system.
Profits taxes were introduced to replace the old practice o f profit remittance. SOEs
were allowed to price their extra-quota products independently without taking
reference to plan price (so-called Double-track price system ). At the same time, the
Govenmient reduced the number o f industrial products subject to mandatory planning
and central distribution.
3 Fan, Qimiao and Nolan, Peter. r h W ^ F^nomic Reforms. StMartin's Press. 1994.
7
The third stage starting from 1987 focused on the autonomy o f SOEs. "The main
purpose was to reduce government intervention in the running o f SOEs and to make
them financially independent, and to introduce profit rather than plan fulfillment as the
indicator o f enterprise performance." (Fan, 1991) A l s o , government started to replace
the investment and working capital financing it provided to SOEs by commercial bank
loans. SOEs were given free hands in making investment decisions and factor
allocation, particularly in staff hiring and termination.
However，as Fan pointed out, "the reform (o f SOEs) is proceeded on an ad hoc，trial
and error basis，without a p i^etermined blueprint." Despite the many freedom given
to SOEs, their operations are subject to the same social and political structure as in the
past. PoHtical pressures still have a say in many decision-making. SOEs are still
expected to take care o f its employees and their dependents in many social-welfare
aspects. Taxation practices stiU aUow the survival o f many inefficient SOEs. More
reform measures are needed to further shake up the SOEs in China.
In the author's opinion, offshore listing is an important step taken by China government
to deepen the reform o f its SOEs. The transformation o f the SOE into a joint-stock
company and the subsequent offshore listing process exposes the enterprise to many
extraordinary forces, which eventually bring about overwhelming changes in its
ownership and reporting structure, organisation, business operations and management
philosophy ‘ These overnight changes may take ages to achieve i f China takes other
means o f reform, (see Chapter V I for more details)
8
Development o f China Securities Market
Another important development o f China economic reform is the reemergence o f the
securities market. Shanghai used to be the most active and the largest securities
market in Asia in 1940's. But after the establishment o f the new China in 1949，
securities market was regarded as a symbol o f Capitalism and was forced to cease
operation.
The economic reform starting from 1979 offered a second chance to the development
o f the China securities market. Eager to resolve its economic problem, China
government attempted to facilitate the reform by reintroducing the securities market.
In 1983，the first issue o f share was arranged in Shenzhen, the venue for capitalism
experiment in China. The shares were issued by an investment company. It was
immediately followed by Shanghai Tianqiao Department Store which issued stocks in
September 1984. The stocks issued at that time showed strong characteristics o f debt
securities with their fixed redemption period and dividends payout."
The success o f stock issues by these two companies attracted more and more SOEs to
participate in the experimental shareholding reform. Many over-the-counter securities
trading centres were established all over China to facilitate secondary trading o f these
securities. D u e to the limited investment opportunities in China, thousands o f Chinese
people poured their savings into the newly established securities market. To provide a
more regulated trading marketplace, two formal stock exchanges were set up in
4 Hung-ruLiu., "Listing of Mainland Enterprises in Hong Kong - A subjert of Innovation"
(Tndiih Triniblin-) - nf Papers for the Seminar on Listing of Chma
��� in Hong Kong. _ h Translation) Kwan, Wong，Chan & Fong Hong Kong,
1992
9
Shenzhen and Shanghai respectively in 1987. At the end o f 1991, a total o f 3,220
shareholding companies o f all kinds were set up in China. Among them，98 companies
issued shares to the general public for subscription.
China securities market entered into a new phase o f development in 1992 when Deng
Xiao-ping gave his blessing to shareholding system during a visit to the Shenzhen
special economic zone. His positive remarks ended the controversial debate on
whether shareholding system is a practice o f capitalism or communism. Thereafter,
China moved at a surprising speed in developing its securities market.
The emerging China securities market attracted the attention o f global investors.
Learning from the experience o f other emerging markets，China cleverly adopted a
cautious approach in letting foreign investors into its infant securities market. A
special class o f shares - B shares - was created for foreign investors, distinguishing
from A shares which can only be held by P R C citizens.
The caution o f China officials are understandable. China securities market，though has
grown substantially in size, is still at its infant stage o f development The country just
has its national company laws issued in mid 1994 while the national securities laws is
still underway. Its regulatory system over trading activities and listed companies
lagged far behind the pace o f the market. Direct participation o f foreign investors,
who have massive capital and more sophisticated investment strategies, may intensify
the speculative activities and volatility o f the China securities market.
10
In such context, overseas listing of China enterprise can serve multiple purposes to the
development o f China securities market. First，it releases the pressure for immediate
opening up o f the domestic market in China, allowing the authority to have more time
to develop its regulatory and other supportive infrastructures. Second, it offers a
window for China to raise foreign capital directly. Third, it creates valuable
opportunities for China to learn from the experience o f major stock exchanges and get
itself used to international practices. Last but not least, the overseas listing o f China
stocks activate global investors' interest and understanding of China which will pave
the path for their direct participation in China domestic securities market in the future.
TABLE 1
KEY STATISTICS OF THE CHINESE STOCK EXCHANGES (as at end of January, 1995)
^^ ^^^ . 120
No. of listed companies � ' J
No. ofUstedsecuritiesCdailyaverage (RMBmiUioiO (RMBmiUuHO
turnover in shares) (241.00) 118 (147.86)
• ™ \23.46 24 (2,94)
• B shares f .272 24 5 (N/A) • Government bon^ 5 ( 2 � J (34.58) • Government bonds repurchases 5 ( � 〈 J � ^ 726 46)
• Government bonds futures 1。 （75，582.30) 18 ( ’ (3 02)
• Convertible bonds 0 ^ _ )
• Other bonds : 9 (N/A) • Warrants na … • Unit trusts/funds 12 ( � 8 (59.63)
504 No. of member finns
Total 一 p i _ n 二 o n ) 二 。 ' ）
• A shares 215’72”u . .
• B shares 9，788.37 , _ _ �
Source : data were provided the China Research Unit^ Research & Planning Department^ SEHK
11
f
、 Capital Needs o f China
China needs massive foreign capital to support its economic development. Overseas
listing, as discussed, provides an easy and efficient access to global investment funds.
In the past，foreign loans and direct foreign investment are the two major sources of
foreign capital for China. They provided US$112 billion and US275 billion foreign
capital respectively to China in 1993, representing an increase o f 41 percent and 150
percent over the records in 1992^ As a result, China was ranked the second largest
foreign funds receipent in the world, only after the United States'.
Capital needs o f China is likely to continue to grow. For instance the infrastructure
project o f the Three Gorges along the Yang-tse River alone will need US$25 billion
for total investment in the next 17 years^. Moreover, the telecommunication,
transportation and energy sectors are in need o f huge investment inputs in the coming
years. Simply using foreign loans and foreign direct investment wiU not be sufficient to
meet such needs.
More importantly, these two fund-raising methods have their shortcomings. Foreign
loan financing is a very expensive means to raise capital. It is also tightly controlled by
the central government. Only a few commerical banks and financial institutions, such
as the Bank o f China, the Bank ofCommuniation, the People's Construction Bank of
5 ^taMcalYe^Ttiook of China. Statiscal PubUshing H o ^ � � � ‘ f h i i 1
6 "China Ranks Secondth in Attracting Foreign Capital," Securities Tunes, China, 1
7 S ^ S r g S p r o j e c t Considers Funds-raising through Bonds Issue," H o � Kong Economic
Journal. 14 March 1995.
12
China, the Industrial Bank o f China«，and the China Investment and Trust International
Corporation (CITIC) , are permitted to issue international bonds directly. On the other
hand, direct investment by foreigners is not permitted in some key industries. In some
cases, the returns o f the SOEs may not be good enough to attract direct foreign
investment.
Compared to the aforementioned methods, overseas equity issuance offers a low-cost
and convenient way for China to tap foreign capital. It will not further increase China's
burden in foreign borrowing and interests payment. It enables the State to retain its
overwhelming control on key enterprises, given the diversified foreign shareownership.
It also allows more SOEs to absorb foreign capital directly.
rhina's partidpation in the intftmational economic ^rena
Since its economic reform in 1979，China has been increasingly participating in the
international economic community. This is demonstrated by the growth o f its foreign
trade and overseas direct investment in China.
China's total foreign trade was valued at US$ 195 .72 billion in 1993, comprising
exports o f US$91.77 billion (+8%) and imports o f US$103.95 billion (+29%). Major
trading partners o f China come from all parts o f the world, led by Japan (20%), Hong
Kong (17%), the U S (14%), Taiwan (7.4%), Germany (5.7%) and Sourth Korea
( 4 . 2% ) , Wi th the improved competitiveness o f China industrial products，economists
expect that China will become one o f the largest trade entity in the next century.
« In Apra 1 9 9 5 ， 卿 皿 c e d t h e reduction o f ， < J ^ t r a t i n = 二 u ^ C h i n e s e
c o ^ r c i a l banks to Baaa. I t is w i d e l y expected that the rating of C m C wiU be down-graded very soon.
13
As discussed in the last section, China saw increasing direct foreign investment in the
country. Between 1980 to 1993, China approved a total o f 174,056 foreign
investment projects, with contracted foreign capital o f US$217 billion, o f which
US$60 billion had been actually utilised.^' Representing a massive market with a
population o f l . l billion, China is expected to continue to attract foreign funds from
all over the world.
Overseas listing o f China SOEs can be considered as promotional activities to build up
the international image o f China in front o f global investors Their listings in
world-class stock exchanges demonstrate the strengths o f China SOEs in meeting the
international standards. Wide coverage by international press provided the kind o f
exposure China needs in the international economic community. The relationships
established between China officials and their foreign counterparts also create the
foundations for more cooperation in the fiiture. All these activities will enhance
China's economic activities internationally including the reentrance to the GATT. To a
certain extent, the overseas listed SOEs are playing a role similar to that o f the
Ping-Pong teams sent to the international contests in 1980's. They demonstrated
increasing China's participation in global economic community.
rhina' resumotion o f Hong Kong^s sovereignty
Another contributing factor leading to offshore listings o f China enterprises is the
expected resumption o f the sovereignty o f Hong Kong from from the U K on 1 July
9 Hong Kong Trade Development Council，Market Profile - Mainland China, No. 133，26
10 ^ngKongTrade Development Council, Market Profile • Mainland China, No. 133，26
April, 1994.
14
1997. The integration o f such a typical capitalist city with the socialist China is not
only a concern to the six million Hong Kong people, but also to many other countries
which have substantial commercial interests in the colony.
According to the Sino-British Agreement signed in 1984, Hong Kong's all existing
economic and social systems will remain unchanged after the change o f sovereignty.
To give more assurance, Deng Xiao-ping said in 1985 that horse-raising (gambling)
and dancing - the two symbolic activities o f the Capitalism - can be retained in Hong
Kong for at least 50 years.
China has used different ways to demonstrate its commitment to maintain Hong Kong's
status-quo. Listing o f SOEs in Hong Kong is an example. With its key SOEs listing
there, it will be against China's own interests to bring about any damage to the existing
economic system in Hong Kong.
The successful China listings also illustrated clearly the possible benefits，rather than
damages, brought about by the integration between Hong Kong and China. The
concept that Hong Kong as a capital market in China has already been implanted into
many people's minds. It helped people in Hong Kong, China and the rest o f the world
to prepare pyschologicaUy for the official integration to be happened in 1997. Last but
not least, listing o f China enterprises can facilitate Hong Kong to evolve into a
world-class equity market, which contributes to its roles as a major financial centre.
China enterprises can give the niche Hong Kong needs in the keen competition against
other markets.
15
C H A P T E R T H R E E
O V E R V I E W OF O F F S H O R E L IST INGS OF C H I N A ENTERPR ISES
Since the listing o f Tsingtao Brewery in 1993，China has already arranged 17 o f its
key SOEs for primary listings in foreign markets. Among them, 15 were Usted in
Hong Kong and 2 in New York. The potential o f this business has aroused the
attention o f investment banks, securities-related professionals and stock exchanges all
over the world.
This chapter first examines the national policies o f China in arranging offshore listings
o f its enterprises, including the objectives, the selection o f enterprises and the selection
o f listing venue. It then looks at the keen competition among world stock exchanges
for China listing business.
r ^ vpmm^n t policies Qv^r oiTkhore listings o f China enterprises
In most stock markets, the decision o f seeking an overseas listing is purely a matter o f
the enterprise concerned. This is not the case in China. Like other economic
activities, offshore listings o f China enterprises are under careful central planning and
arrangements. When the plan was first raised by the Stock Exchange o f Hong Kong
in 1992，it was brought to the government officials in particular those in State
Commission for Restructuring the Economic System. At that time. Vice Premier Zhu
Rongji was in charge o f the project." Even at the operational level, central
/
16
government was also deeply involved. Overseas Listings Unit within the national
securities watchdog China Securities Regulatory Commission ("CSRC") participa~es in
the selection of enterprises for offshore listings, the selection of listing venues, the
selection of investment banks and accounting finns and many other operational
arrangements.
Overall policy
China government considers offshore listing a national policy to promote the growth of
its economy rather than a corporate financing for individual enterprises. In a recent
conference, the Vice-chairman of the State Commission for Restructuring the
Economic System Hungfu was quoted ," the shareholding reform and subsequent
offshore listing of SOEs has far-reaching implications to the development of China
economy. .... First, it opened a door for China enterprises to admit into the
international capital market to raise funds for production and construction. Second,
the formalised shareholding system reform resolved many structural difficulties and
problems hindering the development of these state enterprises and obviously raised the
enterprises' competitiveness. Third, these enterprises, following international standards
in their management and operations, allow China listed companies to build up their
good image in the global market and serve as live examples for other China
enterprises in their modernisation. ,,12 In other words, offshore listing can help China to
raise foreign capital, to improve SOE's economic efficiency by resolving structural
problems and to establish their image as modern, well operated China enterprises in
local community and overseas.
11 .
12 David Lake, " H ... for Hong Kong," Investor Relations, summer 1994 "Important Implications of Overseas Listing of State-owned Enterprises," Securities Times, China, 4 March 1995.
17
During the interview, the vice-chairman o f the C S R C s Overseas Listing Unit Nei
Qing-ping assured that offshore listing is a long term policy o f China government and
is not going to alter due to personnel changes or temporary market sentiment. The
appointment o f a new Chairman o f the C S R C as well as the under-performance o f
China shares in foreign markets may lead to adjustments in the pace and the scale o f
offshore listings, but will never bring an end to it. Instead, what China will do next is
to fixrther promote the successM reform experience o f these enterprises among the
many state enterprises.
Selection o f state-owned enterprises for offshore listings
China securities officials were criticised by internal and external parties for their
limitation o f offshore listing to a selected few state enterprises" So far only 31 SOEs
were nominated by the State Council as the potential candidates for offshore listings.
This is a very small figure considering the fact that there are around 400,000 large-size
state enterprises in China and among which 50,000 are considered as key state
enterprises.
Selection process was long and complicated. The SOE applicant must first obtain the
approval from its supervisory bureaus . ( I n the case o f a province-level enterprise，it
must get the approval o f the provincial government while in the case o f a central-level
enterprise, it must get the nod o f the relevant industrial supervisory department.) It
can then submit its offshore listing application to the State Planning Commission, the
State Commission for Restructuring o f the Economic System, the Economic Trade
13 "Beying Wrestles with Foreign Listings," Tnstitiitional Investors, January 1995.
18
Commission and the Securities Regulatory Commission o f the State Council for review
and approval. These four Commissions will evaluate all applications based upon the
various standards set by the national polices and come up with a final list o f
recommendations for the review o f the State Council which will make the final
decision on these applications.^^ As one can see, the whole selection process involves
many different parties. Conflicts o f interests and power struggles may easily be
aroused in the process.
To provide clearer guidelines,China issued the "Guidelines on the Selection o f
Enterprises for Offshore Listings" in March 1994^^ which set forward four basic
criteria, including:
• the enterprise should be in the focus industries specified by the state government in
that time being;
• the enterprise should need capital badly for development while foreign investment in
the enterprise is permitted. For those which have government approved key
projects will have priority over others;
• the enterprise should have good economic efficiency and ability to earn foreign
exchange. In principle, projected annual foreign exchange earnings should be more
than 10 percent o f the face value o f shares issued to foreign investors;
14 Gao-fong Liu, "How do Enteiprises Heading for Overseas Listing Process the Reform of
Shareholdine SYStem?" f=;ecurities China. China, 31 May 1994. . S S f o r ^ e r s e a s L i s t i n g ^ must Meet Industrial Policy," Tai Kung Pao, Hong
Kong, 24 March 1994.
19
• those listed in Hong Kong should have capital assets o f 400 million R M B or more
while those listed in Europe or the United States over 1 billion RMB .
So far, it was those in the pillar industries such as energy, communication and
transportation being selected for offshore listing. Market practitioners believe that this
will remain the case for a long period o f time since infrastructure development is the
current focus o f China government and these projects usually are more difficult to seek
commercial financing.
Selection o f listing venue
The listing venue o f China enterprises is currently limited to Hong Kong and the
United States. The former Chairman o f C S R C Liu Hongru explained the rationale
behind such policy that," a step-by-step approach is preferred by the China government
due to the lack o f offshore Usting experience." H o w e v e r , C h i n a does not rule out the
possibility o f listing its enterprises in other markets in the future. In fact, CSRC is
currently discussing with securities regulators from Tokyo, London, Canada and
Australia on future regulatory coordination. It also intends to conduct a study on the
pros and cons o f listing on various stock markets other than Hong Kong and the
United States, including Singapore, Canada and Europe''.
Apparently, diversification o f Usting venues seems to be a clever strategy. First, it
creates pressure to Hong Kong and New York, which would benefit China in
16 Foo Choy Peng, "Watchdog to Investigate More Foreign Listing Venues,"SouthChina
Mnmittg Post 13 December 1994.
20
bargaining with these two markets over the terms o f listing and capital raising.
Second, it helps maintain the relationship between China and other countries.
Nevertheless, such strategy may not be very practical It is because spreading the
listings o f China stocks over a number o f stock exchanges will not bring much benefits.
As far as capital raising is concerned, the listing venue does not make much difference.
Ultimately China will access the same pool o f global funds in todays globalised
investment environment. In the consideration o f secondary trading, concentration o f
China stocks in a market is expected to facilitate the development o f the critical mass
for China stocks, thus providing higher trading liquidity. Diversification o f listing
venues on the other hand tends to hinder such development.
It is therefore more reasonable for China to concentrate the listing o f its enterprises on
a few foreign markets. Even for some unknown reasons China needs to diversify the
overseas listings，it is expected that competition will stiU eventually lead to the
emergence o f one central marketplace for China stocks.
rompeti t ion among world stock exchanges
After the successful listing and trading o f China stocks in Hong Kong, many stock
exchanges are courting China for similar listing arrangement in their markets. Their
behavior is understandable. Apart from the prestige o f attracting foreign firms，the
stock exchange will get substantial listing fees from China issuers. The listing
professionals in their countries will receive fat fees for advising these foreign firms ”
n "Plunging into Foreign Marke t s , " The Economist, 17 September 1994.
21
More importantly, they can offer their investors access to China, the most promising
market in the next decade.
Some stock exchanges which are considered as more active in seeking the listing o f
China stocks in their markets are briefly discussed below:
Australia
The Australian Stock Exchange (ASX ) is aggressively looking to become the London
o f the Southeast Asia- Pacific region. An Asian board has been on the drawing board
for some time and around US$213 million has already been spent on the project. The
Asian board is expected to capitalise at more than US$3 billion by the end o f 1995 and
will contain companies from China, Malaysia and Indones ia "
The A S X targets at China proxy companies, includidng companies incorporated
outside China but ultimately controlled by Chinese parties and the joint ventures with
substantial China business exposures. By end o f March 1995，there are 5 China proxy
companies o f various kinds Usted on ASX . The selling points o f Australia^ as
described by the ASX^s Director o f Government and International Operations, are "its
reputation for being clean and efficient, political stability，a less volatile exchange and
the absence o f a long waiting list." However, the trading o f the China proxy
companies so far listed in Australia was not satisfactory. Some Australian institutional
investors complained that these China stocks were too difficult to understand.
厂 ”Australia S e ^ Out China Listings," Tnstitotional Investor, 26 Fd>niaiy 1995.
22
Canada
Stock exchanges in Canada are also eager to attract companies from China. The
Toronto Stock Exchange (TSE), the second largest stock exchange in North America,
is coming close to finalise a memorandum of understanding with the CSRC on
regulation on China stocks. 19 Meanwhile, the TSE has started to take up China
companies through back-door listings since mid 1994. These China enterprises,
through acquiring the controlling stake of an inactive listed company, obtained listing
status on the TSE. Some people suggested that with its reputable international status,
its good experiences in serving heavy industrials such as energy and transportation, and
its substantial population of Chinese citizens, the TSE could be a possible venue for
the listing of China enterprises.
Another Canadian stock exchange Vancouver Stock Exchange (VSE) announced its
intention to develop an Asian Board in December 1993. China stocks, in particular the
B shares listed on Shanghai and Shenzhen stock exchanges, are the major targets of
VSE in developing its Asian Board. 20 The idea however received cool responses from
global investors. It was probably due to its loose regulation and the image as a
mickey-mouse ~xchange.
London
London is proud of the international flavor of its stock market. Due to historical
reasons, London has developed the world's most active market for foreign equities. It
is now the most internationalised stock exchange in the world, measured by the
19
20
"Toronto Soon Approves Listing of China State-owned Enterprises," Hong Kong Economic Journal, 22 June 1994. " Asian Board to be Launched in Vancouver," South China Morning Post, 7 November 1994.
23
number o f foreign Ustings. Its SE A Q International, the largest O T C market for
international stocks, offers continuous two-way quotations for many securities listed
on many major markets, including Hong Kong. However, despite its excellent resume，
London has yet to attract any listing o f China stocks. Some people suggested that
London's failure was caused by the recent political tension between the Sino and
British governments.^^
Nevertheless, London Stock Exchange is still working very hard to attract China
listing. It is now lobbying the China government for the signing o f a memorandum o f
understanding over regulatory matters. Also, it tries to persuade China to list its
enterprise in London through Global Depository Receipt ( G D R , an ADR-type product
addressing both U S and European institutional investors).忍 As this product targeting
at sophisticated consumers, the L S E promised to set lower requirements in disclosure
for China issuers. For instance, enterprises were able to file accounts in their local
format, without compliance to international standards.
Singapore
Singapore Stock Exchange (SSE) always has the ambition to become the trading
venue for Asian stocks. It established the C L O B International for this respect,
jardine group companies, after t hd r delisting in Hong Kong , are now listed and traded
in Singapore. China enterprise is another target focus o f this market.
21 Simon Pritchard and Ivan long, "Fair-weather Friends," South China Morning Post 1 May
1994
22 Sheei Kohli, "London Bids for New Listings with ADR-type Plan," South China Morning
Post 14 September 1994.
24
As usual, Singapore is very low-key in lobbying for China listings. But given the good
relationships between the political leaders in the two countries, it is very likely to
become the third market for direct listing of China SOEs. The drafting of a
memorandum of understanding on regulatory matters is known to be nearly finished.
Also, new listing and trading rules were introduced in August 1994 to boost the
foreign listing. 23 This included the reduction of the minimum trading board lots; the
. relaxation of cumulative earnings minimum to S$15 million over a three years period;
and the admission of non-member foreign brokers to the foreign stocks trading screen,
instead of putting the transactions through a member of SSE.
Tokyo
With its good knowledge and experience in China, Japan is very interested in becoming
the listing venue for China enterprises. However, its high listing costs and the low
interest of Japanese retail investors in the foreign stocks make Japan not a very easy
place to stay for foreign issuers. At least 38 foreign companies delisted their shares
since 1991 complaining high costs and barriers to entry.
In response to this embarrassing trend, the Japanese want to attract companies from
Asia to replace the western companies pulling out from its stock market. Led by the
Tokyo Stock Exchange and the four largest brokerage firms, a full plan of promoting
foreign listing started in mid 1994.
23 Renee Lai, "Mainland firms Urged to Look to Singapore," South China Morning Post 28 November 1994.
25
To start with, Tokyo Stock Exchange relaxed its listing requirements for foreign
companies.24 Listing applicant is now only required to have at least 10 billion yen o f
shareholder equity and 2 billion yen o f pre-tax profit compared to 100 billion yen and
20 billion yen respectively in the past. The requirement o f more than one year
incorporation for privatised companies has also been dropped while listing fees paid to
the exchange was reduced substantially. Tokyo Stock Exchange is now considering
the possibility o f relaxing the Japanese language reporting requirement for foreign
companies.^'
24 Christine Chan, "Tokyo Exchange to Lure Listings，" South C h i n a Morning Post. 5
25 S S ' ^ l i r T S E Ready to Ease Language RuHng," Honp Kong Standard. 1 March 1995.
26
CHAPTER IV
LISTINGS OF CHINA ENTERPRISES IN HONG KONG AND THE UNITED STATES
Although many stock exchanges want to take part in the business of China listing,
Hong Kong and New York are so far the only two serious candidates in the
competition. This chapter reviews the current situations in Hong Kong and New
York, their achievements in listing China enterprises, and their advantages and
disadvantages being a listing venue for China stocks.
Current situations in Hong Kong and New York
Hong Kong and New York stock markets share many common characteristics. Both of
them take pride in their market fairness, security and efficiency; both are international
markets with high participation of investors worldwide; both markets are fully opened
to local and foreign users; and both markets want to achieve a breakthrough in its
market development.
New York Stock Exchange (NYSE) is the largest and most reputable stock exchange
in the world. Its current market capitalisation is USS4,232,151 million, comprising
over 2,000 local and international companies.26 In recent years, NYSE faces keen
competition from National Association of Securities Dealers (NASD). The electronic
trading systems it administers, NASDAQ, now .becomes the second largest securities
"Statistics for World Stock Exchanges, 1994" Fact Book 1994, The Stock Exchange of Hong Kong.
27
market in the US. To maintain its lion share, N Y S E is actively promoting its market
services to non-US companies, including China. By doing so，it wants to take away
the crown o f London to become the most internationalised securities market in the
world.
The Stock Exchange o f Hong Kong (SEHK) is very young compared with NYSE . It
conmienced operations in 1986 after the unification o f the then existing four stock
exchanges in Hong Kong. In its nine years history, the SEHK has undergone
enormous structural changes and eventually turned into a well respected efficient
marketplace. In terms o f market caphalisationt. Hong Kong is now the eighth largest
stock exchange in the world and the second largest in Asia, after Japan. Facing the
rapid development o f other regional markets, the SEHK adopts a China strategy in
1992 and sets for itself a mission to promote capital formation in Hong Kong and
Ch i na . .
TABLE 2 KEY STATISTICS OF THE STOCK EXCHANGE
IN HONG KONG AND THE US " b a t t u e end of 1994) HONGKONG NEW YORK
market capitalisation US$267，331 m — US$4,232,151 m
animal trading tumover US$126,079 m US$2,454,242 m _ ^
number of listed companies -domestic 502 2，353
^ . 7 7 2 1 7
- foreign “
number of listed stodks 541 3，150 __
Tear end index (o/o change) AU Ordinaries In^x 工 I : 二 二 T
1991 2334.11 (+36.1%) 3168.83 (+20.3%) 一 1 9 9 2 2 9 5 1 . 0 6 ( + 2 6 . 4 % ) 3 3 0 1 . 1 1 ( - 4 . 1 7 % )
-1993 6075.18 (+105.86%) 3754.09 (+13.7%) -1994 4074.52 (-32.9%) 3834.44 (+2.14%)
source : Fact Book 1994, SEHK
»
28
China enterprises listed in H o " ? and New York
Hong Kong
Long before the formal listing o f H shares, the Hong Kong stock market has been
servicing China through raising capital for Hong Kong listed companies to support
their China investment.�？ Starting from 1992，an innovative trend emerged in the
utilisation o f the Hong Kong stock market by China enterprises. Hai Hong Holdings
successfuUy sought a listing on the S E H K via setting up a Hong Kong incorporated
holdings company to control its China interests. This indirect listing method placed the
China enterprises under the governance o f Hong Kong corporate laws and other
securities regulations. At the same time，some special fimds investing in the emerging
China stock market also came to Hong Kong for listings thus further enhancing th€
contribution o f the Hong Kong stock market to the capital formation in China.
However, S E H K was not content with these indirect services provided to China
issuers. It wanted to see direct capital raising by China enterprises in Hong Kong.
Starting from 1992，it worked closely with the China securities officials to create a
listing regime enabling direct listing o f China enterprises in Hong Kong. In October
1992，nine SOEs were selected by the State Council as candidates for direct listing in
Hong Kong. Prior to their listings，these enterprises would be reformed into
share-holding companies and have their business and financial structure completely
reshaped in order to meet the listing requirements in Hong Kong. Investment banks,
accounting firms and law firms in Hong Kong and elsewhere were all invited to
provide assistance in this historic reform. At the same time，the China securities
27 pa^i Chow "Prospects and Opportunities for Listings of China-based Companies in the Hong Kong i ^ i o^p. “ Pror^ngs of cms Seminar. Centre for International Business Studies,
Lingnan College, December 1992.
29
officials and S E H K worked together to come up with an appropriate regulatory
framework for these China enterprises to be listed in Hong Kong. To ensure that
investors will be offered with the same level o f protection as i f they were investing in
local stocks, a new chapter was added to the listing rules o f SEHK which require
China issuers, in their constitutional documents, maintain provisions o f corporate
governance and shareholder protection similar to the Hong Kong regime.
After a fuU year o f hard-working, the first China enterprise Tsingtao Brewery was
successfully listed in Hong Kong. Market response was extremely well, reflected by
the remarkable over-subscription rate o f 110 times. Similar success was experienced
by the other eight China enterprises which have their shares listed on SEHK
subsequently. In autumn 1994，China selected another 22 SOEs for the second batch
o f offshore listings. Most o f them will seek listing in Hong Kong but five will be
arranged to list in the United States. U p to 31 March 1995，Hong Kong saw the
listing o f 15 H shares in its market with total funds o f HK17.8 billion raised.
TABLE 3 H SHARES LISTED ON THE SEHK
N a m e o f C o m p a n y L i s t i n g D a t e F u n d . R a i s e d S u b s c r i p t k m ，
(HK$) ( T 删）
Tsingtao Breweiy 15 July 1993 889,280,000 110.5
Shanghai Petrochemical 26 July 1993 2,654,400,000 * 1.7
Beiren Printing 6 August 1993 208,000,000 25 Machineiy
Guangzhou Shipyard 6 August 1993 327,387,840 77
Maanshan Iron & Steel 3 November 1993 3,933,751,100 68.7
\
. . . " / . .
30
Kunming Machine Tool 7 December 1993 128,700,000 628
Y i z h e n g Chemical Fibre 29 March 1994 2,380,000,000 20.21
TianjinBohai Chemical 17 May 1994 408,000,000 1
Dongfang Electrical 6 June 1994 481,100,000 15.1
Machinery
Luoyang Glass 8 July 1994 912,500,000 1.02
QingUng Motors 17 August 1994 1,035,000,000 23.5
Shanghai Hai Xing 11 November 1994 1,576,800,000 13.95
Zhenhai Refining & 2 December 1994 1,428,000,000 6.53
Chemical
Chengdu 13 December 1994 448,000,000 5.91
Telecommunications
Haibin Power 16 December 1994 1,122,300,000 1.4
；include the 840 miUion H shares offered to the US and internationally as American Depository
= ; = = 二 £ ^ = 办 腕 ， 一 一 一
Stock Exchange of Hong Kong.
United States
The first China company entered the US market was Brilliance China, a
Bermuda-incorporated company whose only asset was a PRC bicycle plant. BriUiance
rushed for a direct listing on N Y S E in October 1992, taking advantage o f the unclear
government policies and the emergence o f China fever in the US at that time. It
rapidly became the "honey" o f American investors and its share prices rocketed from
US$16 to US$34.73 level. Stock exchanges in the US recognised the potential
business and began to lobby the China government for direct listing of China
enterprises in its mailcet. At the same time, investment banks also grasped the
31
opportunities to introduce China B shares into the US market through the
establishment o f Level one American Depository Receipts (ADRs) , which only
requires simple registration with the SEC.
In July 1993 when Shanghai Petrochemical was primarily listed on the SEHK, an
international offering was arranged to tap funds outside Hong Kong. A secondary
listing on N Y S E was also acquired by the company.
The China fever began to wear out in mid 1994 when the market focused on the
tightened China economy and the possible political stability after the passing o f Deng
Xiaoping. The listing o f the first N share ADRs Shangdong Huaneng in August 1994
received cool market response. Its turnover quickly slumped with its price falling
below its initial subscription level This intensified the market concerns on China
stocks and eventually led to a 38 percent cut in the initial price o f the second N share
Huaneng Power International,*
Facing the disappointing precedence, the other three China enterprises scheduled to list
in the US slowed down thdr progress in listing preparation. Meanwhile, market
participants suggested China to consider dual listing o f its enterprises in the US and
Hong Kong in order to facilitate trading liquidity.
28 xiangwei Wang, "Red Chips Wear Out Welcome on Wall Street," Easterp Express, 8
October 1994.
32
T A B L E 4
H / N S H A R E A P R S L I S T E D O N T H E N Y S E
Company Listing date Funds raised (US$]
Shanghai Petrochemical ADR 26 July 1993 “ (1 ADR = 100 H shares)
Shandong Huaneng ADR 4 August 1994 州 碰 伽
(1 ADR = SON shares)
Huaneng Power 6 October 1994 625mimon
International ADR (1 ADR = 40 N shares) —
Source : Data were provided by the China Research Unit, Research & Flaming Department, The
Stock Exchange of Hong Kong.
Tmportant issues for consideration
I n determining where to list their securities, some issues are considered as more
important and should be given special attention by China issuers. They are the
differences between Hong Kong and the U S stock market in 1) regulatory regime,
2)offering mechanism, and 3) market characteristics.
Regulatory regime
Hong Kong and N e w York stock markets are operating under two very different
regulatory regimes although both are trusted by market users in terms o f investor
protection.
I n Hong Kong , the front-line supervision o f the primary market was the responsibility
o f the SEHK. The Securities & Futures Commission (SFC) oversees the work o f
S E H K and will interfere only when the S E H K fails to take action properly. Unlike
33
their US counterpart. Hong Kong regulators conduct very detailed vetting o f listing
prospectuses and other cprporate documents. There have been queries recently from
market practitioners about the need for such detailed vetting given the fact that these
documents before their submission have already verified by professionals^. But the
SEHK turned down the suggestion considering that investors and market practitioners
in Hong Kong are not yet prepared for such a system.
China issuers are not given any privileges in Hong Kong in terms o f regulation.
Starting from the beginning，the SEHK ruled out the possibility o f a lower standard
second board for China stocks. It believes that only by applying the same set o f rules
to China stocks will investors have the confidence to invest in these issues. This
subsequently is proved to be a successful strategy.
Regulation o f the U S Securities market is the responsibility o f Securities & Exchange
Commission (SEC) while N Y S E and other stock exchanges focus on the management
and development o f the marketplace. Foreign issuers raising equity capital in the US
are subject to the U S federal securities laws and regulations^ mainly include:
• Securities Act o f 1933 - govern the initial public offerings o f securities with the
intention to provide investors with M and fair disclosure in connection with their
purchase o f securities that are offered for sale by issuers in the U S market.
29 The Way Forward - Market Consultation Paper, The Stock Exchange of Hong Kong,
30 US Capital Market - An Introduction to United Securities Uws for Non-US
TsRiiers of Securities. Brown & Wood, 1994.
34
• Securities Exchange Act o f 1934 - govern the continuous reporting requirements
o f issuers whose securities are listed or traded on the securities exchanges and the
OTC markets in the US.
The US laws place greater emphasis on the protection o f investor interests in initial
public offerings and any violation to the 1933 Act, but not the 1934 Act, will be a
criminal offense.
Securities regulation in the U S market relies heavily on fuU and fair disclosure o f
information and the due diligence o f market professionals. Issuers that have their
securities for sale or traded in the U S must register with the SEC. Hiey must file with
the SEC various types o f disclosure documents and forms providing detaUed business
and financial information about the companies and the securities offered/traded. In
normal cases, the SEC does not conduct detailed vetting o f these documents. Instead,
it is the securities practitioners who assist in the offering or trading arrangement to
ensure their completeness and validity. Any errors or incompleteness may lead to legal
actions taken by the SEC or private investors. This is the so-called due diligence
concept.
The sophisticated disclosure regime in the U S is generally considered as too tight and
costly for foreign issuers to comply. To facilitate the utilisation o f the U S capital
market by foreign issuers, the SEC has been relaxing the disclosure requirements in
the past few years. The introduction o f Rule 144A, for instance, allows foreign issuers
to raise funds from U S qualified institutional investors with minimal filing
' / .
35
requirements. In late 1994, the SEC further gave foreign companies seeking US listing
greater flexibility in choosing the currency they will use for presenting their financial
accounts?! It is also considering in the long run to allow foreign issuers to present
their accounts in the format o f International Accounting Standards instead o f the US
General Approved Accounting Principles (GAAP).^^ These measures are weU received
and since late 1990 more than 600 foreign companies from 27 countries have entered
the US public market for the first time.
An important factor in determining the listing venue o f China enterprises will be which
o f the two regulatory regimes is better. In the surface, the US approach seems to be
more simple and attractive. China enterprises generally find H more difficult and
time-consuming to seek a listing on the SEHK than on the NYSE . Hong Kong
regulator tends to ask much more questions than its US counterpart. While, the US
regulator is much easier to dealt with and all it concerns is whether all necessary
information has been disclosed properly.
However, a closer examination will show that the Hong Kong regulatory approach is
in fact more suitable to China enterprises. An important purpose o f offshore listing is
to enhance modem management o f SOEs. The demanding Hong Kong regulator is
acting as a coach to guide these enterprises in their corporate governance
development. These valuable transfer o f knowledge and experience will benefit the
enterprises in the long run. Moreover, the China enterprises seek US listings are
31 "New SEC Rules Make It Easier for Foreign Firms to List in US," Business Times,
Sing^re, 14 December 1994.
32 Sees Intl Accounting Standard for Foreign Listings," Business Times, Singapore, 24 September 1994.
36
exposed to a much greater risk o f legal prosecution than if they were listed in Hong
Kong. In the US, legal prosecution is widely adopted to resolve disputes between
individuals and companies. This is a hidden cost that China enterprises should be
aware of when they seek listing in the US.
Offering mechanism
A common argument favoring the US market as a venue for China listing is related to
the different initial public offering ( IPO) mechanisms adopted in Hong Kong and the
US. An IPO is defined as "the process whereby shares of a company are first offered
to the public for subscription (in the case o f new shares to be issued)，or sale (in the
case o f existing shares already in issue).
In Hong Kong, a fixed price subscription method is the most common practice in an
IPO arrangement.^ Underwriters and the issuer reached consensus on a subscription
price before the public offering. Public investors use such price in their subscription to
the shares being offered. In case o f over-subscription^ the shares will be allotted to
subscribers on a pro-rata basis. In case ofunder-subscription, the remaining shares
will be taken up by the underwriters.
In the US, the subscription price will not be fixed in advance. Instead, the issuer and
the underwriters will first conduct promotional briefings for m^o r institutional
. S � t i " � " ^ � � o r 緣 S t a �
F i n 中 ” es China Daily, China, 11 October 1994.
37
investors. During the process, the book will be gradually built up based upon the
interest expressed by the神 investors. The final offering price will be set at a level in
which demand and supply can be balanced.
people argued that the US's book-building method will maximise the price the issuer
gets for the securities it offered. In the Hong Kong's fixed price subscription method,
the underwriter will have strong temptation to keep the subscription price at a low
level in order to reduce the risk o f under-subscription.
In response to this accusation, a Hong Kong merchant banker said that the
book-building concept is already built in the IPO oflarge issue in Hong Kong. In the
past, most o f the IPOs in Hong Kong is rather small，normally around HK$80 _ 90
million. There is no need for any book-building because institutional investors and
high net-worth persons often prefer to purchase the shares after certain observation
period. Only recently did Hong Kong start to see securities offering in very large
scale. In these cases, international placement is often needed given the massive size o f
the offering. Underwriter and the issuer will also meet and check with major
institutional investors before finalising the subscription price. He queried whether the
US book-building method can guarantee a high P/E ratio. " I f the sponsor fails to build
the book during the process, the P/E ratio will be forced to slump,": he said. The case
ofHuaneng Power International, whose final subscription price was one-third lower
than the original price, served as a real example.
38
Market characteristics
Some market characteristics are considered by market participants as major
contributors to the more active trading o f China stocks in Hong Kong than in the US
stock market.
First, the Hong Kong market is better informed o f China developments given its
proximity and important economic relationship between the two. News reporting on
China is much fester and has wider coverage in Hong Kong than in the US. Most i f not
all securities firms' research departments have special teams covering China market.
These researchers M o w closely the developments o f H shares as well as the much
greater number o f China concept companies Usted on the SEHK. Their research
coverage facilitates investment interest on the H shares. As a market practitioner
pointed out，"Without research coverage, the securities will only attract speculative
trading." He believed that it wiU be difficult, i f not impossible, for N shares to attract
similar attentions from the U S press or securities firms, given the massive foreign
securities available at the marketplace.
Second, Hong Kong has long been the market for international investors to access
China. I n the investment portfolio o f most China funds, one can easily find a lot o f
SEHK-listed companies. These issues are regarded as China concept companies with
their heavy exposures in China market. They include the many industrial enterprises
whose manufacturing bases are located in the Pearl River Delta region, the many
properties developers who have expanded their business to China and the many
retailers which target at the growing China consumer market with great potential.
39
Hong Kong stock market, to a certain extent, has been regarded by international
investors as part o f the China securities market already. Trading China enterprises via
Hong Kong seems to be the most logical thing to these investors. Whether the N Y S E
can alter this concept is doubtful.
Third, Hong Kong retail investors are also considered as having stronger and more
long-term investment interest in China enterprises than the general U S investors. The
strong investment interest is backed up by their sophisticated knowledge about China
market and the intimacy created by historical and cultural linkages Comparatively,
general investors in the US have poor knowledge about China or even Asia. And
experience indicated that the investment interest o f the U S investors in emerging
markets tend to be short-term and unstable.
今 山 产 , , . n d Di^dvantages o f Listing in Hong Kong and the United States
The advantages and disadvantages China enterprises facing in Usting their shares in
Hong Kong and the U S are summarised below:
Hong Kong United States
Strengths Strengths • sophisticated investors with strong and • strong distribution power given the
long term interest in China many institutional investors with
financial muscle
• strong research supports and in-depth • the most reput^ le ^ o c k ma rk^ in the
news coverage o f China market to world ofFermg listed issuers with
provide high exposures to China issues international prestige
L
40
• established channel used by international· higher PIE ratio in initial public investors to invest in China market offering
• a secondary market with high liquidity for China stocks
• committed stock exchange and market practitioners to promote the development of the China stock market
• lower on-going listing costs due to proximity and sharing of common language
Weaknesses
• unfavorable market PIE ratio
• very sensitive to China news, China stocks always a victim of market speculation
• experienced market practitioners and investors in heavy industrial stocks or high technology stocks
• establish presence in the US which is one of the largest markets of China products and services
• one of the most liquid stock markets ill the world
Weaknesses
• low and unstable investor interest in China stocks
• limited research support and news coverage on China market
• relatively small market scale which may • inactive trading of China stocks restrict its capacity in absorbing large floatation
• international reputation is relatively lower
• expensive on-going listing costs (management time, professionals fees, telecommunication expenses, translation etc.)
• less sophistication among local investors· strong competition from other foreign in heavy industrial or high technology stocks also listed in the US finns
41
CHAPTER V
T R A D I N G PERFORMANCE OF H SHARES A N D H/N S H A R E A D R S
The initial public offering is not the end o f funds raising for a listed company. When
they want to raise funds from the market through rights issues or private placement,
the current P/E ratio and more important, the liquidity o f the securities in the
secondary market will be crucial factors for consideration.
To evaluate the performance o f SEHK and N Y S E in offering a liquid market for China
stocks，the price performance and the trading turnover o f the 15 H shares and the 2 N
shares since their first listing to 8 March 1995 are examined.
This chapter outlines the scope, methodology and the detailed findings o f the
quantitative analysis on the trading perfonnance o f the H shares and N shares listed in
Hong Kong and the United States.
Slcnpe and methodology o f the analysis
The study aims to review and compare the trading performance o f the 15 H shares
listed on SEHK and the three H share/N share A D R s listed on N Y S E since their first
listings up to 8 March 1995.^'
35 A limitation of this analysis is the small number of China stocks Usted in the stock market compared with the 15 H shares available at Hong Kong. The sample size may be too sinaU to
make a firm conclusion on the perfonnance of the US market.
42
The trading performance o f each stock is determined by: 1) its trading liquidity and 2)
its price movement. Trading liquidity is measured by the average monthly turnover
ratio o f the stock, where
Monthly turnover ratio = Monthly trading turnover in shares
Total number of issued shares
Price performance is measured by 1) percentage o f trading days in which the closing
price o f the stock is below the initial subscription price; and 2) comparison o f the price
movement o f the stock relative to the general market index o f the relative stock
market.
Findings
The findings o f trading liquidity analysis indicate that China stocks were traded more
actively in the Hong Kong stock market than in the United States.(see Table 5) The
average monthly trading turnover ratio for all H shares was 0.7 percent while the ratio
for H /N share A D R s was only 0.12 percent. In particular, Shanghai Petrochemical
which is traded in both Hong Kong and the US was found to have a much higher
monthly turnover ratio in Hong Kong.
The analysis on the price performance o f China stocks traded in Hong Kong and the
US shows that other than those listed in late 1994, most H shares continuously
maintained a price level equal to or higher than their issue prices. The two N share
ADRs howevCT had thdr market prices below the issue prices in almost all trading
days. (Table 6)
43
T A B L E 5
T R A D I N G L I Q U I D I T Y O F C H I N A S T O C K S
L I S T E D I N H O N G K O N G A N D N E W Y O R K S T O C K E X C H A N G E S
C ^ ^ y Issued s h 簡 “ A v g monthly turnover Avg monthly turnover
in shares ratio
Beiren Printing 100,000,000 108,670,922 1.09
Chengdu Telecom 160,000,000 48,593,850 0.3
DongfangElec. 170,000,000 176,308,409 1.04
Guangzhou Shipyard 157,400,000 202,414,879 1.29
Haibin Power 469,150,000 154,091,820 0.33
Kunming Machinery 65,000,000 89,860,511
Luoyang Glass 250,000,000 208,855,642 0.84
Maanshanl&S 1,732,930,000 841,310,968 0.49
QingUng Motors 980,000,000 421,818,819 0.43
SHHaixing 1,080,000,000 478,127,023 0.44
Shanghai 1,680,000,000 972,170,470 058 Petrochemical TianjinBohai 340,000,000 174,531,935 0.51
TsingtaoBreweiy 346,850,000 408,219,139 1.18
Yizheng Chemical 1,000,000,000 420,663,990 0.41
Zhenhai Refining 600,000,000 103,063,876 0.17
Huaneng Power 1,250,000,000 118,980,000 0.1
N share ADRs
Shandong Huaneng I, i6»,700,000 192,775,000 0.16
N share ADRs
Shanghai 1,680^,000 179,195^38 0.11 Petrochemical H share APlto
44
T A B L E 6
PERCENTAGE OF TRADING DAYS WITH C L O S I N G B E L O W T H E ISSUE P R I C E
C ^ ^ l ^ t ~ H i g h e s t Lowest Closing as % of daily
price at 8 M a r closing below
1995 issue price
Beiren Printing 2.08 7.6 1.51 1.6 112
Chengdu Telecom 2.8 2.8 2.1 2.35 100
DongfangElec. 2.83 4.65 2.2 2.8 19.3
Guangzhou Shipyard 2.08 5.9 2.12 3 0
Harbin Power 2.58 2.68 1.93 2.33 88.7
Kunming Machinery 1.98 7.25 1.7 1.73 12.9 .
Luctyang Glass 3.65 4.66 2.8 3.08 63
Maanshanl&S 2.27 4.98 1.23 1.43 26.9
Qingling Motors 2.07 3.48 1.8 1.85 18.2
SHHaixing 1.46 1.77 1.23 1.42 56.4
Shanghai Petrochemical 1.58 3.9 1.45 2.13 口
TianjinBohai 1.2 1.59 0.74 0.94 72.6
Tsingtao Brewery 2.8 10.8 3.3 3.6 0
Yizheng Chemical 2.38 3.34 1 84 2.5 35.6
Zhenhai Refilling 2.38 2.38 1.49 1.74 100
Huaneng Power 20 20.13 12.25 14 ^5.5
N share ADRs
Shandong Huaneng 14.25 14 8 8.63 100
N share ADRs —
45
The price charts in the Appendix show the price movements of all H shares and HIN
share ADRs relative to the general market movement (reflected by the Dow Jones
Industrial Average in the US and the Hang Seng Index in Hong Kong). For easy
comparision, the stock price and index point of the first trading day were rebased to
100.
The findings indicate that other than Maanshan Iron & Steel and Kunming Machinery,
most of the H shares listed in Hong Kong performed close to or even better than the
general market. This can be clearly shown by the chart of Hang Seng China Enterprise
Index, an indicator of the aggregate movement of all H share. The chart shows that
the HSCEI performed much better than the HSI in the early stage. But this advantage
disappeared after more H shares were listed and the HSCEI moved closely with the
Hang Seng Index during the rest of the study period. While, the 'two N share ADRs
Solely listed in the US were found continuously under-petformed the general market.
Discussion
Market participants attribute the relative inactivity of China stocks in the US stock
market to "greater familiarity with the China market, more awareness and an enhanced
level of news and research coverage in Hong Kong ... 36 They urged China to review its
overseas listing policy and allow US listing only when a Hong Kong listing is sought
simultaneously.37 They also warned the China issuers to be more realistic in setting the
issue price and become aware of the fact that the China fever has already gone.
36
37
"China Studies Dual Listing after NYSE Offe~ It ,Privatisation Intrenational Predicasts Newsletters. London, October 1994. "Chinese Stocks on Wall Street still Lack Appeal: US Reception Remains Cool", Financial Times. 7 November 1994. .
46
However, certain technical obstacles will need to be resolved before the trend of dual
listings can take off F or instance, regulators in Hong Kong and the US have to get
consensus on who will be the ultimate regulator of the issuer. A great deal of
coordination will also be required in the simultaneous cross-market offering including
pricing and release of the prospectus.
47
CHAPTER V
. DISCUSSION AND CONCLUSIONS
To conclude the study on overseas liSting of China enterprises, this chapter is devoted
to discusses two key issues, 1) implications of overseas listing on SOEs and the China
economy and 2) implications of overseas listing of China enterprises on the Hong
Kong stock market in its future developments.
Implications on SOEs and China Economy
Overseas listing of China enterprises is going to be one of the milestones in the history
of China economy. The development is more than the creation of a means for China
to tap foreign capital. It is also more than a breakthrough in the participation of China
in international economic forum or one more step in building up relationship with
major countries. Far more important, overseas listing provides incentives and the
structural changes required by China SOEs to improve their economic efficiency.
In a central planning society such as China, SOEs are more than economic units. They
also become political and social units which bear responsibilities in maintaining the
control of the central government over key economic institutions and in providing the
social services and financial shelters to its employees and their dependents. These .
goals are not just confusing but sometimes competing, especially when there are
always different interest groups within SOEs. While the participation of the party
48
representatives has been decreasing in SOEs in recent years，the conflict o f interests
between the business management and general workers as well as their dependents still
exists. The issues is further complicated by the so-called agency pmbkmS^ where the
state property can not be properly protected due to the conflicting role of the
management in the SOEs.
The company secretary o f a China SOE which has successMy gone through the
process described the overseas listing exercise as “ a historic event during which the
old framework was broken down and new rules governing future operations were
established" During the exercise, the SOE saw the dramatic changes of the following:
Area in change Before After Ownersh ip State^wned enterprise: A share-holding enterprise:
structure belong to the state or the aU assets belong to the shareholders ^
肌 6 including the State，the employees，the China people it represents L l and foreign investors, and the
corporate investors.
^ • • • Supervisory Committee which • shareholders meeting Organisational representatives， • board of directors structure employee representatives and the • general meager
unit leader
• operational level
Operational all decisions by the unit leader procedures which is empowered by the
shareholders meeting
MnnitnHnii monitored by the state and relevant fewer government mtervention and Mon丨tormg ^rtmente including the Finance mainly momtoredl^: mechanism a^Ltment, the special committee • CSRC
governing the industry of the SOE • SEHK and some other related units • SSE
• shareholders
38 Keun Lee, "Property Rights and the Agency Problem in China's Enterprise Reform," m
ramhridge Journal of Economics 1993,17，179-194.
49
Overseas listings provide a good reason for the central government to clear up the
confusion in these SOEs. Without such exercise，a full review and reform o f the
ownership, organisational structure, operational procedures and monitoring mechanism
could never be proceeded so smoothly among SOEs. Nor would the involvement o f
external parties, not to mention those accounting and legal experts from foreign
countries, in the reform process be possible.
Another major impact on the overseas-listed SOE is the formalisation o f the
organisation. During the restructuring process，all external and internal relationships
related to the S O E had to be formalised by contracts or agreements, e.g. employment
contracts, social services agreement, supplier contracts, loans arrangements, corporate
constitutions. This implies verification and redefinition o f the rights and obligations o f
all parties involved, which in the past may not be M y aware of.
Management o f SOEs, during their participation in the overseas listings，are exposed
to international market practices in management and business operations. Such
experience will fecilitate the adoption o f modem management. O n the other hand, the
SOEs themselves can establish valuable international network which will benefit their
own business development Shanghai Petrochemical, for instance, received over 100
groups o f foreign delegations suggesting business cooperation since their overseas
listing. International exposure also makes these SOEs well known in overseas which
facilitate the marketing o f their products in overseas. The SOEs listed in major markets
are also exposed to queries from the press, securities analysts and shareholders which
create pressure for improvement in business efficiency and profit-making.
50
Nevertheless, one should not over-expect the outcomes generated by the changes.
Though there are dramatic changes inside these SOEs, the environment they are
operating remains unchanged. China remains a socialist country with its social
economic structure still dominated by central planning. Thousands o f S O E s，
including the suppliers, customers or business partners o f the overseas listed SOEs, are
still pending for structural changes. The influence o f these very few SOEs to the
China economy is minimal for the time being. But they can be regarded as the seeds o f
modem enterprise in China. Wi th the continuous supply o f sunshine and water, they
will start to grow and have their roots deeply extended into the ground in China, and
some day they will bring about more dramatic changes to China economy.
Implications on the Hong Kong Stock Market
The performance o f the China stocks so far listed overseas seemed to suggest that
Hong Kong is the winner in the contest for China listings. Although New York can
provide the world-class status to the SOEs, it failed to develop a liquid market for
China stocks. As suggested by market practitioners, listing in the U S should be used
for publicity purpose only. O n the other hand. Hong Kong in general served the China
stocks very well. The H shares generally maintain good liquidity in the Hong Kong
stock market. It can be said that up to now Hong Kong is the most appropriate listing
venue for China SOEs.
However, one should not forget it was just the first round o f the competition. I f the
U S market becomes more sophisticated in China matters and establishes a critical mass
51
for China stocks, the existing liquidity problem may be resolved. To retain its success.
Hong Kong must continue to improve its market, making it more attractive for global •
investors to trade local stocks and China stocks there. It should at the earliest
possible time develop itself to be the natural centre of China stocks. To do this, it
should promote commercial and non-commercial research on China economy and its
various industries; it should enhance existing information flows from China to Hong
Kong; it should encourage local practitioners to retain and enhance their existing
expertise in China market; and it should conduct more international marketing to
promote itself as the most efficient listing and trading venue for China stocks.
Moreover, Hong Kong should be aware that in the long run it will face a completely
different group o f competitors. After 1 July 1997, Hong Kong will become a special
administrative area o f China. It will no longer be qualified as a possible site for
overseas listing. Its competition with New York or other major stock exchanges will
come to an end. Instead, it will be the most open and internationalised domestic
stock market in China, facing the challenges from other China cities.
Shanghai is considered to be the most important competitor to Hong Kong. It is the
economic centre and domestic financial centre o f China. Its stock market is now the
biggest in the country. Its strategic location makes Shanghai the most promising city
in the future development o f China economy. Moreover, Shanghai and its people have
the vision and the will to reclaim what they lost since 1940's - the leading financial
centre in Asia.抑
热 "Shanghai Aims for Status as World Finance Centre by 2010," South China Morning Post. Hong Kong. 4 April 1994.
52
In the competition between Hong Kong and Shanghai, most o f the strengths o f Hong
Kong are "portable" ajssets, including capital, management skills, experienced
practitioners and international relationship. Capital and practitioners will flow to
wherever the greatest returns is offered while management skills and international
relationship are more or less the belongings o f the first two. With adequate incentives,
these can be exported to Shanghai within a short period o f time. But it will be
difficult, i f not impossible, for Hong Kong to acquire the same economic and political
status o f Shanghai or its strong linkages with various parts o f China.
The only two advantages o f Hong Kong that could not be transferred to Shanghai
shortly are its free business environment and the sophistication o f its market. The free
business environment has been the key successful factor o f Hong Kong in its economic
development while the sophistication o f the market (not reflected by the sophistication
at the top level but by the general understanding o f the market operations at the
bottom level) must take time to acquire. Shanghai must wait until the further
liberalisation o f China in both economic and social-political aspect before it can enjoy
the same level o f freedom in present Hong Kong. It also has to wait until its market
opCTations, regulatory framework and participant sophistication to reach the maturity
in Hong Kong,
Market participants generally believe that Hong Kong will have 15 years time to
prepare for the head-on competition with Shanghai 劝 During this period, it should
spare no effort to retain and strengthen its relative advantages over Shanghai.
和 "Shanghai will Take Around 15 Years to Become an International Financial Centre’" Tai KungPao. 14 March 1995.
53
There are bascially three strategies, addressing the local, China and international
perspectives respectively.
Locally, Hong Kong should try its best to maintain its current freedom, efficiency and
flexibility in its society and economy. Autonomy o f the press and a clean business
environment will be particularly vital.
In terms o f China perspective, it should strengthen its existing linkage with China. A
full plan with carefully designed strategies should be developed to position Hong Kong
in China's economy. The scope o f business development should not only focus on
the Pearl River Delta region, but also the many other provinces in China.
Finally, the international perspective. Hong Kong must retain its current international
flavor. It should continue to be the centre o f international b u ^ e s s in this part o f the
world. Its people should enhance their sophistication on international standards in
addition to their well understanding on China and Asian practices.
A P P E N D I X
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72
B IBL IOGRAPHY
Books
Brown & Wood. Accessing the US Capital Markets - An introduction to US
Securities Laws for Non-US Issuers o f Securities. New York. 1994
Fan, Qimiao and Nolan, Peter. China's Economic Reforms. St.Martin's Press. 1994.
Li，Y. L. Zhongguo Iingji Gaiee Y u Gufenzhi (Economic Reform and Shareholding
System in China. Beijing University Publishing House. China. 1992.
Rayner, Kenneth. Listing Securities in the United States and the United Kingdom.
London/Dordrecht/Boston. Graham &Trotman. 1991.
Sabine, Martin. Corporate Finance. London: Butterworths, 1987.
People's Republic o f China Statistical Bureau Statistical Yearbook o f China.
Statistical Publishing House. China. 1994.
Tang, Yun-wei, Chow, Lyime and Cooper Barry J. Accounting and Finance in China.
The Stock Exchange o f Hong Kong. Stock Exchange Fact Book 1994. Hong Kong.
1995.
The Worid Bank. China - Intemai Market Development and Regulation.
Washington. D C, 1994.
Periodicals
Lake, David. "H... for Hong Kong," Tnvestor Relations. Summer 1994.
Lam, C. T. ” A Brief Discussion on the Strategies o f Overseas Listing," Securities
Market Weekly ( 键 知 年 同 納 . C h i n a . 3 December 1994.
Ng, S.M. "Chinese Enterprises Heading for the West," Capital Magame . Hong Kong.
' l June 1994.
"Australia Seeks Out China Listings," Institutional Investor. 26 Feburary 1995.
"Beijing Wrestles with Foreign Listings," Institutional Investor. January 1995.
73
"Plunging into Foreign Markets," The Economist. 17 September 1994.
Monthly Market Statistics. The Stock Exchange o f Hong Kong. Feburary 1995.
Research Papers
"Comparision o f Hong Kong with Overseas Stock Markets for the Listing or Trading
o f PRC Enterprises in a Commercial Perspective," unpublished internal paper.
Research & Planning，SEHK. 1994.
Centre for International Business Studies. Prospects and Opportunities for Listings o f
China-based Companies in the Hong Kong Exchange. Lingnan College. 1992.
Jarrold, Peter and Lall, Rajiv. "China: Reform and Development in 1992-93，" WorM
B a ^ Discussion Papers. The World Bank. Washington D.C. 1994.
Lee, Keun. "Property Rights and the Agency Problem in China's Enterprise Reform," .
Cambridge Journal o f Economics 1993, 17,179-194. 、
"Mainland China," Market Profile. Hong Kong. Research Department, Hong Kong
Trade Development Council. No. 133. 26 April 1994.
Newspapers
"Asian Board to be Launched in Vancouver," South China Morning Post. Hong
Kong. 7 November 1994.
"Foreign Stocks Face Loose Rules in Tokyo," Asian WaU Street Journal. 20
December 1994.
" I m p o r t a n t Implications o f Overseas Listing o f SOEs，" Securities Times. China. 4
March 1995.
"Listing o f Chinese State-owned Enterprises Soon in Tomoto," Hong Kong
Hconomic Journal. 22 June 1994.
"NYSE Sees Int l Accounting Standard for Foreign Listings," Business Times.
Singapore. 24 September 1994.
"New SEC Rules Make It Easier for Foreign Firms to List in US，" Business Times.
Singapore. 14 December 1994.
Bei, Dao-guang and Wang, L .W. "A New Era for the Overseas Listing o f
State-owned Enterprises," Securities China Daily, China, 11 October 1994.
74
Chan, Christine. "Tokyo Exchange to Lure Listings," South China Morning Post.
Hong Kong . 5 November 1994.
. F u n g , Noel. "Guiddines issued for Hong Kong Listing o f Chinese Shares," South
China Morning Post. Hong Kong , 20 June 1994.
Hughes, Duncan. "Australia Lures More Listings from Mainland,"South China
Morning Post. Hong Kong . 21 October 1994.
Kohli, Shed. "London Bids for New Listings with ADR-type Plan," South China
Morning Post. Hong Kong . 14 September 1994.
Lai, Renee. "Mainland Firms Urged to Look to Singapore," South China Morning
Post. Hong Kong. 28 November 1994.
Lai, Renee. "Exchange Takes Care Over China Dual Listing," South China Morning
Post Hong Kong. 18 August 1994.
Lim, SoonNeo. "H shares — Highlight or Hype?" Business Times. Singapore. 4
January 1995.
Liu G F "How do the Overseas Listed Enterprises Proceed the Shareholding System
Reform?" China Securities ( . China. 31 May 1994.
Lucas, Louise. "Chinese Stocks on Wall Stree Still Lack Appeal - US Reception
Remains Cool," The Financial Times. London. 7 November 1994.
Lucas, Louise and Middelmann, Conner. "Chinese Issues Face Delays and Reductions
in Size，" The Financial Times. London. 13 Feburary 1995.
Peng, Foo Choy. "Tokyo Eyes Asia Firms for Listing," South China Morning Post.
Hong Kong. 22 June 1994.
Peng, Foo Choy. "Watchdog to Investigate More Foreign Listing Venues," South
rh ina Morning Post. Hong Kong. 13 December 1994.
Pritchard, Simon and Tong, Ivan. "Fair-weather Friends," South China Momins
Post. Hong Kong. 1 May 1994.
Sreenivasan, Ven. "Hu Urges Regional Firms to Seek Listing on S'pore Exchange,"
Business Times. 13 September 1994.
Wang, Xiangwei. "Red Chips Wear Out Welcome on Wall Street," Eastern Express.
Hong Kong. 8 October 1994.
Interviews
Cai, Hong-ping. Shanghai Petrochemical Co Ltd, China. Interview. March 1995.
* 75
Cheung, Stephen. Peregrine Capital Ltd, Hong Kong. Interview. March 1995.
Fang, Han-ping. Yizheng Chemical Fibres Co Ltd, China. Interview. March 1995.
Li，Meocre. Arthur Anderson, Hong Kong. Interview. March 1995.
Nei, Quin-ping. The China Securities & Hegulatory Commission, China. Interview.
March 1995.
David. Emst & Youngs Hong Kong. Interview. March 1995.
Wong , Wai-ming, H S B C Corporate Finance Ltd, Hong Kong. Interview. March
1995.
Speeches
Chen, S. S. "Consideration Factors o f the Venues for Overseas Listing," The 2nd
Conference on the Development o f China Securities Market and Comparative
Studies on the Securities Markets in China and Overseas. 14 December 1994.
Guan, I S . "The Channels and Prospects o f the Overseas Listing o f Chinese
Enterprises," The 2nd Conference on the Development o f China Securities Market
and Comparative Studies on the Securities Markets in China and Overseas. 14
December 1994.
Lin, Vincent. "Practical Experiences o f the Overseas Listings o f Chinese Enterprises,"
The 2nd Conference on the Development o f China Securities Market and
Comparative Studies on the Securities Markets in China and Overseas. 14
December 1994.
W u , Y .S . "Successful Practice o f the Overseas Listing o f Shanghai Petrochemical,"
The 2nd Conference on the Development o f China Securities Market and
Comparative Studies on the Securities Markets in China and Overseas. 14
December 1994.
Policy Paper
The Securities Market Implications o f the Level o f Over-subscriptions in Recent Initial
Public Offerings. Securities and Futures Commission and The Stock Exchange o f
Hong Kong Limited, Hong Kong, August 1993.
The Way Forward - Market Consultation Paper. The Stock Exchange o f Hong
Kong, March 1994.
The Way Forward - the Strategic PlaiL The Stock Exchange o f Hong Kong,
Feburary 1995
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C U H K L i b r a r i e s ！
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