SOURCE / ECONOMY
Opinion: Chinese firms have diversified financing avenues besides US market
Published: Apr 11, 2022 09:15 PM
Illustration: Chen Xia/Global Times

Illustration: Chen Xia/Global Times

Though there has emerged a silver lining from the China-US auditing negotiation recently, a Forbes article claimed on Sunday that "Chinese companies are delisting fast [from US exchanges]."

Citing estimates from the American Enterprise Institute, the article said the delisting trend "has already reduced the market capitalization of Chinese firms listed in America by half."

It is true that Chinese firms listing or intending to list at the US capital market now have second thoughts about their financing approaches due to increasingly risky policy environment in the US. In addition to a relentless tariffs war and the continuous crackdown on Chinese tech firms, the previous Trump administration chose to include US-listed Chinese firms into its confrontation campaign toward China, and threatened to delist them with hardened audit requirements. 

Before the US Securities and Exchange Commission (SEC)'s recent move of announcing a provisional list of companies that may be forced to delist, many high-profile US-listed Chinese firms had completed dual-listing to dilute risks, mainly choosing Hong Kong as their secondary listing market. 

Solely within the technology, media, and telecom (TMT) sector, a total of 11 Chinese firms have conducted dual listing since 2018, according to statistics from Ernst & Young released on Monday.

Indeed, the uncertain market environment is one factor driving the trend, but that is far from the whole story. Increasingly, Chinese firms have seen more diversified financing channels beside the US stock exchanges, such as exchanges in Hong Kong and Chinese mainland, or, as the Forbes article mentioned, the direct investment in China by American capital.

Hong Kong Financial Secretary Paul Chan Mo-po said in February that the city is ready for US-listed Chinese mainland companies in case they decide to seek a secondary listing in Hong Kong and will provide greater flexibility for dual primary listings. Also, the new Beijing Stock Exchange is expected to accommodate homecoming listings of Chinese stocks in the future.

Moreover, China is now one of a handful of major capital destinations across the world against the backdrop of the COVID-19 pandemic and the turbulent world geopolitics. The central parity rate of the Chinese currency renminbi, or the yuan, strengthened to 6.37 against the US dollar on Monday from 7.14 in May 2020. 

The country has been attracting record high foreign investment despite the lukewarm global economy. In 2021, the actual use of foreign capital in China increased by $173.48 billion, up 20.2 percent year-on-year and much higher than the global average.

China's effective prevention measures against the novel coronavirus clearly has paved the way for business operation and other economic activities. Despite constant challenges, profit-driven capital from both home and overseas have maintained their faith in China's economy.

According to domestic news site Yicai Global, the world's largest hedge fund, Bridgewater Associates, has further expanded its presence in China, with the size of one of its China-themed funds swelling by 13 percent in the first quarter.

Meanwhile, it's worth stressing that China has acknowledged to support Chinese firms' choices of listing overseas. Chinese regulators have shown efforts to enhance bilateral communication and reach audit cooperation arrangements within the framework of China and US' respective laws. 

From the perspective of the US, recklessly piling pressure on Chinese firms may only blow their confidence in the so-called "inclusive" financial market and driving them away from Wall Street. Given there are many other financing avenues available, Chinese companies have nothing to lose in the long run. And only by promoting cooperation will benefit both sides.

The author is an editor with the Global Times. bizopinion@globaltimes.com.cn