BUSINESS
CHINA DAILY | CHINADAILY.COM.CN/BUSINESSWednesday, August 7, 2019STAR Market to be
global game changer
Reforms may ‘challenge’ growth in
overseas IPOs of mainland-based firms
By ZHOU LANXU
[email protected]Shanghai’s STAR Market is set to
change the global competitive
landscape of capital-raising hubs,
given its fundamental reforms
which are friendly to tech compa-
nies, but the rising STAR Market
still has a long way to go to become
a real Nasdaq-like market, experts
said.
On Tuesday, the first 25 public
firms on the new STAR Market
retreated after the US Treasury
labeled China “a currency manipu-
lator”, with only one of them ending
higher with the rest registering
losses ranging from 4 to 15 percent.
But such considerable losses
could not erase the profits the new
listings had earned for investors —
share prices of the 25 companies
rose by an average of 29 percent
from their offer prices as of Tues-
day.
This happened despite that esca-
lations in trade tensions triggered
by the US administration’s new tar-
iff threat had weighed down major
global stock markets, including
China’s A-share market.
The benchmark Shanghai Com-
posite Index ended lower for the
fourth consecutive trading session
on Tuesday, down 1.56 percent at
2777.56 points, the lowest since late
February.
Relatively robust gains of the
STAR’s new listings have led to
heated discussion among investors
about whether future world-class
high-growth tech firms are among
them and later peers, changing the
scenario that overseas markets had
captured most floats of Chinese
tech giants, such as Tencent and
Alibaba.
“The STAR Market has relaxed
initial public offering standards,
including accepting companies
with special equity structures such
as dual-class shares and variable
interest entity or VIE structures,”
said Ge Yang, partner of global law
firm DLA Piper, who is in charge of
facilitating overseas IPOs of main-
land-based companies.
These reforms, with registration-
based initial public offering
reforms as the core, may pose a
“challenge” to the growth in over-
seas IPOs of mainland-based firms,
many of whom may choose to go
public at home on the STAR Mar-
ket, said Ge.
“There has already been some
shake-up, with several IPOs set to
list in Hong Kong canceling their
applications to instead float inShanghai,” said law firm Baker
Mckenzie’s report, citing the exam-
ple of biomedical storage equip-
ment producer Qingdao Haier
Biomedical Co Ltd, whose IPO
application was accepted by the
Shanghai Stock Exchange in April.
“For mainland-based companies
seeking IPOs, they are likely to
receive higher valuations on the
STAR Market than on bourses out-
side the mainland, giving the board
a big advantage,” said Zhu Ning,
deputy dean of the National Insti-
tute of Financial Research at Tsing-
hua University.
A higher valuation of an IPO
means that stocks are offered to
investors at a higher price and that
the company raises more money
from the IPO.
The valuation premium comes
from investors’ higher recognition
and the preference of local enter-
prises, as well as the paucity of
investment targets — a large
amount of domestic funds chase a
rather small number of high-tech
listed firms, said Zhu, who is also a
professor at the Shanghai
Advanced Institute of Finance at
Shanghai Jiao Tong University.
Being a public company on the
STAR Market may also mean
receiving more policy support
than on overseas markets, as the
country tries to facilitate develop-
ment of the STAR Market and
technological innovation, Zhu
said.
Nevertheless, the STAR Market
may be eclipsed by some overseaspeers when it comes to promoting
a company’s globalization, such as
improving corporate governance
in accordance with international
standards, according to Zhu.
Xue Yi, a finance professor at
the University of International
Business and Economics in Bei-
jing, echoed Zhu’s views and said,
“For Chinese tech companies
regarding financing as the main
purpose of going public, the STAR
Market is attractive given its valu-
ation premium.”
For companies seeking the
enhancement of their reputation
through IPOs, however, the Nas-
daq might be, at this stage, a better
choice than the brand-new STAR
Market, Xue said, adding that the
IPO standards of the STAR Market
may still be too strict for some
innovative startups.
For instance, the expected total
market capitalization of a new
applicant at the time of listing
must be at least HK$150 million
($19.15 million) for Hong Kong’s
growth enterprise market for
small- and medium-sized enter-
prises, well below the 1 billion
yuan for the STAR Market.
“Despite the debut of the STAR
Market, many mainland-based
firms will still seek overseas IPOs,
partly as the new board does not
allow overseas institutional inves-
tors to take part in the IPO process,”
said Li Qiang, regional co-manag-
ing partner of Asia at DLA Piper.
The absence of overseas institu-
tional investors, especially those
from the United States, not only
restricts companies’ access to
funds but dents their pricing effi-
ciency during IPOs, according to
Li.
“US institutional investors,
experienced with registration-
based IPO systems, would require
high-quality information disclo-
sure and be capable of under-
standing them to price a stock,” Li
said, adding that introducing
overseas institutional investors to
the IPO process will help boost the
STAR Market’s attractiveness to
tech companies.
For the STAR Market to become
a real Nasdaq-like market that
attracts quality tech firms and fos-
ters them into world-class lead-
ers, it must generate long-term
investment returns and maintain
ample liquidity, which requires
minimizing administrative inter-
vention in price formation and
strengthening investor education,
said Zhu.
As of Tuesday, the SSE has
accepted 149 IPO applications on
the STAR Market, with 28 of them
having got final approval from
securities regulators.Investors check stock price movements at a securities brokerage in Nanjing, capital of Jiangsu
province.QU XING / FOR CHINA DAILYNew institute to map
out future networks
By MA SI
[email protected]
The China branch of an institute
for future networks was established
in Shenzhen, Guangdong province,
on Tuesday as the nation steps up
its push to promote international
communication and exchanges on
information and communication
technologies (ICT).
The China Branch of the BRICS
Institute of Future Networks is
designed to deepen cooperation
among Brazil, Russia, India, China
and South Africa to boost the
development of key technologies
including 5G, artificial intelli-
gence and information security.
Chen Zhaoxiong, vice-minister
of industry and information tech-
nology, said ICT is leading a new
round of technological revolution
and the next decade will be a cru-
cial one for BRICS and other devel-
oping countries to achieve rapid
development.
“The new institute is of great sig-
nificance to further deepen cooper-
ation between BRICS and other
developing countries, promote the
application and innovation of
future network technologies, and
support the development of the dig-
ital economy,” Chen said.
China’s Academy of Informa-
tion and Communications Tech-
nology, a government research
institute, is in charge of building
the China Branch of the BRICS
Institute of Future Networks.
Liu Duo, president of CAICT,
said the new high-end think tank
will focus on the research of poli-
cies concerning 5G, industrial
internet, artificial intelligence, the
internet of vehicles, information
security and other technologies.
“It is positioned to deepen inter-
national exchanges and accelerate
technological innovation and appli-
cations, for instance, building a
mechanism to jointly promote tech-
nical standards on ICT,” Liu said.
Also, more efforts will be made
to promote talent communication
among the five countries and
co-organize more training ses-
sions, Liu added.
Zhao Houlin, secretary-general
of the International Telecommuni-
cation Union, said BRICS members
are all developing countries and
emerging markets, and they
account for a very important part of
the total global population. Their
achievements will affect the devel-
opment of the global information
and communication sector.
“We also see strong innovation
capabilities in these countries and
they have a very good understand-
ing of their huge population and
how to offer new technologies to
both urban and rural residents,”
Zhao said.
Egyptian Minister of Communi-
cations and Information Technol-
ogy Amr Talaat said: “The institute
is going to play a pivotal role in act-
ing as a platform not only for
BRICS countries but also other
developing countries like Egypt to
exchange experiences, aspirations
and challenges, as well in digital
technologies such as mobile cities.
“Artificial intelligence comes as
one of the main pillars for our
cooperation in terms of exchang-
ing experiences and bringing Chi-
nese technologies to Egypt,” Talaat
said.
“Egypt currently cooperates
with all prominent Chinese ICT
companies, and they are all part of
the ICT sector in Egypt. We look
forward to expanding this cooper-
ation in the future.”Electric motor maker
to increase UK output
By BO LEUNG in London
[email protected]
Chinese electric motor manu-
facturer Wolong LDG has
announced plans to increase man-
ufacturing output at its Laurence
Scott factory in the English city of
Norwich.
During a recent visit, executives
from the company detailed
Wolong’s international structure
and anticipated growth in the
United Kingdom.
Laurence Scott employs more
than 150 people in the county of
Norfolk making bespoke high-
voltage electric motors for the oil
and gas, nuclear power and
defense markets.
Norfolk County Council officials
and local business leaders also
shared their plans for growth in
the region, and for exploring fur-
ther opportunities for cooperation
between the two sides.
Wang Jianqiao, president of
Wolong LDG, expressed his “great
faith” in the company’s UK busi-
ness, its potential for growth and
the reputation of its brand and
quality, adding that the invest-
ment will be “a massive help to our
existing motor business”.
James Han, vice-president and
general manager of European
operations for Wolong, said: “This
is a new and exciting development
for our Norwich business and
moves us into a new place in our
chosen markets. Wolong is a glob-
al company with worldwide mar-
keting and design platforms. We
will utilize our resources world-
wide with a focus on Europe to
make Laurence Scott business
grow rapidly.”
Manufacturing is the third larg-
est sector in Norfolk and neigh-
boring Suffolk, with business
leaders saying it will continue to
be at the forefront of the UK for
energy generation with a particu-
lar focus on offshore wind, gas and
nuclear energy.
Alan Waters, leader of Norwich
City Council, said: “Laurence Scott
has a long and proud history in
Norwich and Wolong’s worldwide
market expertise and investment
will see the business expand their
influence to new markets, deliver-
ing world-leading advantages in
energy generation. The skilled
Norwich workforce provides
products of the highest quality
that deliver global benefits.”
Chris Starkie, chief executive of
New Anglia Local Enterprise Part-
nership, expressed excitement
about the growing investment
from Wolong and for “recognizing
Norwich as a key center for its
growth”.
Wolong LDG is the large drives
division of Wolong Electric. The
company manufactures in China,
Germany, Vietnam, Mexico, Serbia,
Poland, Austria and the UK and has
more than 18,000 employees world-
wide. The product range stretches
from small motors for home appli-
ances to large motors for oil distri-
bution and marine propulsion.Products of electric motor manufacturer Wolong LDG on display
during an industry expo in Shanghai.PROVIDED TO CHINA DAILY
PBOC plan
promotes
financial
reform in
key fields
By CHEN JIA
[email protected]China’s central bank has issued a
plan to promote financial reforms in
some key regions, to support Shang-
hai’s development into an interna-
tional financial center and foster the
opening up strategy, according to
senior officials.
The reforms will focus on attract-
ing more foreign investors and funds
to China’s financial sector, a measure
to stabilize domestic growth amid
external headwinds, said experts.
“The People’s Bank of China, the
central bank, will use various tools
and deeply explore effective methods
to reduce the financing costs of pri-
vate, small companies and technolo-
gy startups, to push forward regional
financial reforms,” Chen Yulu, deputy
governor of the central bank, said at a
news conference on Monday.
The key measures will cover
inclusive, green and technology
finance, aiming to push forward the
supply-side structural reform and
enhance high-quality economic
growth, said Chen. “Meanwhile, we
will focus more on preventing and
defusing regional financial risks.”Financial reform will support the
development of Shanghai as an inter-
national financial center, and the
high-quality integration of the Yang-
tze River Delta, according to Chen.
China’s financial regulators will
continually open the capital account,
allowing more foreign investment
into the domestic market, especially
for the pilot programs in some key
areas including the Shanghai Free
Trade Zone, said Huo Yingli, head of
the Macro Prudential Management
Bureau of the central bank.
According to data from the central
bank, by the end of July, yuan-de-
nominated stocks and bonds held by
foreign entities reached 3.7 trillion
yuan ($525.3 billion), up by 25 per-
cent from the beginning of this year.
Wang Xin, head of the PBOC
Research Bureau, said the central
bank will also promote cross-border
trade and financial connections in
the Guangdong-Hong Kong-Macao
Greater Bay Area. “We will pruden-
tially assess the financial products’
functions ... to better prevent finan-
cial risks.”
On July 20, the Office of Financial
Stability and Development Commit-
tee under the State Council released
11 measures to further open up Chi-
na’s financial sector, including the
provisions that permit foreign-
funded institutions to conduct cred-
it rating business on all types of
bonds in China’s interbank and
exchange bond markets.
China will further facilitate the
investments of foreign-funded insti-
tutions in the interbank bond mar-
ket, according to a statement issued
by the office.
In recent years, the central bank
has been rolling out and improving
measures to further open up the
financial market. Overseas inves-
tors could make investments in the
markets through various channels,
including the QFII and RQFII
mechanism, direct investment and
the Bond Connect, which effectively
satisfies the differentiated invest-
ment demand of diverse investors.The central bank will
use various tools and
deeply explore
effective methods to
reduce the financing
costs of private, small
companies and
technology startups,
to push forward
regional financial
reforms.”Chen Yulu, deputy governor of
the central bankThe STAR Market
has relaxed IPO
standards, including
accepting companies
with special equity
structures such as
dual-class shares
and variable interest
entity or VIE
structures.”
Ge Yang, partner of global law
firm DLA Piper149
number of IPO applications on
the STAR Market that the SSE
has accepted as of Tuesday