The Chinese government is set to implement stock reforms that will allow investors to have up to 20 accounts. (Photo : www.livetradingnews.com)
A wave of Chinese tech firms have chosen to list shares in China instead of going public in the U.S., as the booming Chinese stock market and domestic regulations make the country more favorable for their businesses, the Wall Street Journal reported.
The report said that the interest among the companies to list shares in the country has increased significantly in recent months, according to lawyers, bankers and early investors in China.
The companies said that it is easier to explain their business to investors and get listed in China, citing the success of companies like Beijing Baofeng Technology Co., whose shares have skyrocketed more than 3,600 percent since listing in China in March.
According to the report, companies already listed in the U.S. have gone private so they can relist in China, and dozens are planning to follow. Significant foreign ownership of Internet content-related companies listed in China is banned based on regulatory rules.
The report said that the move was driven by the easing of listing rules on the Internet and innovation-driven sectors to boost growth and the stock rally that raised the Shanghai Composite Index to 53 percent this year.
Jianbin Gao of PricewaterhouseCoopers in China High said that valuations and the loosening of listing rules will draw more Chinese companies to their home market.
"We anticipate significant growth in technology listings on domestic exchanges," he said.
Tech firms prevously found it hard to gain access to Chinese since China requires government approval before a company could list its shares and demands that companies be profitable before listing. Both of those requirements are expected to change this year as part of government efforts to overhaul its financial system, the report added.
Some analysts, however, said that some big Chinese tech companies will continue to list in the U.S. to obtain better access to funding and expertise to run their businesses. But they do not see any new company in the next few years to follow in the footsteps of the most successful Chinese initial public offerings in the U.S., Alibaba Group Holding Ltd. and Baidu, Inc.
The report said that the next likely candidate for a blockbuster U.S. IPO is Xiaomi Corp., mobile-phone and software maker, but the company said it has no plans for an initial public offering in the next five years.
Chinese tech companies, including Alibaba and Baidu, have long been funded by U.S. venture-capital firms that reaped big returns when the two companies had their IPOs in the U.S.
The report said that any shift to list in China could hamper some U.S. venture firms and, conversely, give Chinese investors a boost, as foreign venture-capital firms whose investment funds are not denominated in the Chinese currency, the yuan, could lose out to Chinese competitors on some of the hottest deals.
