Harry Huang said this would become a major trend for Chinese companies seeking funding from overseas markets in the coming 20 years.

The mechanisms of overseas markets such as New York's NASDAQ are quite suitable for small and medium-sized companies, Huang added.

The government should beef up efforts to help these companies because they play an important role in economic development, he said.

The small and medium-sized companies, most of which are private firms, have developed rapidly in the past two decades.

They contribute more than 30 per cent of China's gross domestic product.

However, they account for only 3 percent of China's total overseas listed companies in terms of market capitalization and only 22 percent in terms of numbers.

Niu Li, a senior economist with the State Information Center in Beijing, said: "They are still greatly under-represented in overseas equity offerings.

"We expect a new wave of small and medium-sized companies seeking overseas listings in the coming years."

What really lies behind that wave is the limited domestic financing resources for private companies thirsty for funds, he said.

"They always find themselves in an unfavourable position compared with State-owned companies regarding access to commercial loans," Niu said.

The domestic stock markets seem to be designed to help reform State-owned enterprises and the listing requirements are too strict for small and medium-sized private enterprises, said a senior economist with the State Information Centre, identified only as Zhang.

"Even if they are qualified, they still have to wait in an endless queue to be approved for the yuan-dominated A-share markets," said Zhang.

The door of the hard-currency B-share markets still remains shut to new offerings, he said.

Meanwhile, the long-anticipated second board - which is expected to facilitate fund raising by small companies - has been shelved, Zhang said.

(China Daily March 24, 2003)