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More private enterprises will join State-owned enterprises (SOE) in the overseas listing spree, but SOEs will still play a dominant role in terms of size, business insiders said.
In the last 10 years, over US$51 billion have been raised by Chinese companies in the international securities market, according to the global investment bank Credit Suisse First Boston.
However, the private sector has not raised enough in proportion to their contribution to China's economy.
Private enterprises are estimated to contribute over 30 percent of China's gross domestic product while they only account for 3 percent and 22 percent of China's total overseas listed companies in market cap and numbers respectively.
"We expect to see more and more private enterprises seek overseas listings due to restrictions of domestic capital markets," Zhu Qing, director of Credit Lyonnais Securities Emerging Markets, said at a China Offshore IPO (initial public offering) seminar in Shanghai yesterday.
Unlike SOEs, the private sector lacks sufficient bank debt financing channels in China.
As to the domestic stock market, the yuan-dominated A-share IPO market is crowded with SOE pipelines and private enterprises have to wait in an endless queue to be approved by authorities. The door of hard-currency B-share market also remains shut to new offerings.
The long-anticipated second board market has also been shelved.
"Hope of getting listed on the second board appears remote," Zhu said.
He believed that the government will encourage more private enterprises to raise funds from overseas markets.
The market has seen that private enterprises are playing an increasingly important part in China's overseas listings, experts said.
In 1999, only about 10 private enterprises are traded in markets outside the Chinese mainland. In 2000 and 2001, 18 and 25 private companies respectively issued IPOs in overseas markets.
However, considering the size of the IPOs, SOEs will continue to dominate China's overseas offerings, experts said.
The State-controlled enterprises' IPOs raised 78 percent of all the money raised in the international capital markets last year.
Experts also pointed out that corporate governance, management integrity and low liquidity in the private sector will be the primary concerns for overseas investors.
(China Daily November 26, 2002)
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