China will soon allow foreign-invested companies to list on its stock markets, with the right to apply for either A or B share listings if they get permission from the Ministry of Foreign Trade and Economic Cooperation (MOFTEC).
"This is a major breakthrough in the opening up of China's stock market," said Xu Hongyuan, a senior researcher with the State Information Center, an influential government think tank in Beijing.
MOFTEC, which announced the green light in a recent notice, was providing the first concrete rules to help domestic listing for foreign-invested companies.
The move will open up a new and lucrative channel for foreign-invested companies financing in China.
The fact that there would be no major policy obstacle for overseas companies wishing to issue shares in China was announced earlier by Zhou Xiaochuan, head of China's securities watchdog, but he fell short of providing details.
The new regulation is in line with China's opening up process, and shows a sense of urgency over integrating the country's financial activities with the world economy, as required for its entry into the World Trade Organization, he said.
Although a handful of foreign companies already hold stakes in A-share companies in China, it is mostly through the purchase of non-tradable stakes held by State-owned institutions.
Such purchases are very complicated and have many uncertainties as they need to be approved by the Ministry of Finance and the China Securities Regulatory Commission (CSRC), said Sun Pengbo, an analyst with Huaxia Securities.
Allowing overseas companies to issue their own shares would save them procedural problems and grant them easier access to China's capital market, he said.
Issuing its own A or B shares would also greatly improve the financial strength of a foreign company in China, said senior researcher Xu.
The move means that China's stock market would no longer just serve the interests of State firms, Xu said. Official statistics indicate that Chinese enterprises raised 150 billion yuan (US$18.12 billion) from the A-share market last year.
Some overseas enterprises have expressed an interest in the public offering plan, but some have said they are not sure about the application procedure.
Many of China's relevant laws do not have rules governing the listing of foreign-invested companies.
More detailed regulations, to be jointly drafted by MOFTEC, the CSRC and the State Economic and Trade Commission, will come out later to give foreign-invested companies clearer guidance as to how they can enter the Chinese capital pool, Xu said.
(China Daily 07/12/2001)
