February 29,2008

A-share Listing Will Open to Foreign Companies

By Ma Wenluo
 

Foreign companies are set to gain greater access to China’s domestic A-share market, a top securities regulator said Thursday. Yao Gang, newly appointed vice chairman of the China Securities Regulatory Commission, said at his public debut that the commission is seriously studying the issue of allowing foreign companies to list in China.

 

China’s rapidly developing capital market and the revaluation of its assets due to RMB appreciation are increasingly attracting foreign companies, many of whom have expressed a desire go public on China’s A-share market. Last November, it was reported that the world’s largest gas company, Russia's gas monopoly Gazprom, was considering the possibility.  Gazprom might have been wishing to emulate PetroChina, whose market value after it went public on the A-share market equaled Russia’s GDP in 2006 and is now two times that of Exxon Mobil’s, making it the world’s largest energy company by market value. Gazprom’s stated intention for listing on the Shanghai Exchange was to "improve the company’s popularity and increase the liquidity of the company’s stock to attract more investment".

Unfortunately, technical and legal problems now all but disallow foreign companies from listing in Shanghai. Gazprom, after careful consideration, recently decided to forego Shanghai for Hong Kong or Singapore, as the company thought the Shanghai Exchange, with its complicated requirements, did not suit the company. Yao Gang acknowledged the obstacles but said, "We are now researching how to promote the substantial advance of this work by formulating related regulations. I believe after these legal problems have been solved, foreign companies will manage to go public in the Chinese capital market."

China is continuing to develop and open its financial markets. During the Sino-American Cabinet-level Strategic Economic Dialogue at the end of 2007, the two parties signed an agreement to allow foreign companies to issue RMB-denominated stocks and bonds, providing foreign companies with new opportunities for finance and expansion of sales in China.

Attracting high-quality company listings is one way stock exchanges expand their influence as global capital markets, especially after exchanges become public companies themselves. Since November 2007 national stock exchanges of Korea, Singapore, London and Tokyo, plus the Nasdaq and New York Stock Exchange, have set up offices in Beijing, seeking to grab rich profits from companies going public on the Chinese market.

While stock exchanges from foreign countries are expanding their business into China, China’s stock exchanges also need to "go out" and encourage good overseas companies to issue stocks and bonds in China’s capital market. The Shanghai Stock Exchange seeks to become an important stock market in the Asia-Pacific Region, while Shanghai itself aims to become an international financial center. But Shanghai can forget about it without major foreign companies listing and trading in its market. With the RMB moving towards becoming a world reserve instrument, the opening up of the securities market is an important way for China to seek global pricing power for its financial products.

 

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