Group links cor­po­rate gov­er­nance to more for­eign in­vest­ments and list­ing in Lon­don

China Daily (Hong Kong) - - BUSINESS - By CECILY LIU in Lon­don cecily.liu@mail.chi­nadai­lyuk.com

Chi­nese com­pa­nies will have to im­prove their cor­po­rate gov­er­nance if they are to earn the con­fi­dence of United King­dom in­vestors, an in­flu­en­tial re­port has re­vealed.

The China City Group, which com­prises busi­ness lead­ers and com­pa­nies from the UK, aims to stim­u­late in­ter­na­tional in­vest­ment in Chi­nese com­pa­nies, as well as en­cour­age them to list on the Lon­don mar­kets.

Led by John McLean, chair­man of China Res­o­lu­tions, an in­vest­ment man­age­ment firm, the group be­lieves Bei­jing reg­u­la­tory au­thor­i­ties should bet­ter su­per­vise Chi­nese com­pa­nies.

It urged them to fol­low in­ter­na­tional cor­po­rate gov­er­nance rules if they aim to list over­seas.

“I gen­uinely be­lieve that we can achieve mo­men­tum rapidly and that our shared vi­sion will bring ben­e­fits for China and the UK,” said McLean, who is chair­man of China City Group.

“What we are sug­gest­ing are prac­ti­cal steps to en­sure that the UK has rea­sons to be con­fi­dent in the ‘China brand’,” he added.

The re­port is in re­sponse to de­clin­ing in­vestor con­fi­dence in Lon­don-listed Chi­nese firms.

There were 110 main­land com­pany list­ings in Lon­don be­tween 1997 and 2016.

By the end of last month, only 35 re­mained. The ma­jor­ity delisted due to cor­po­rate gov­er­nance is­sues or a lack of in­vestor trust.

An­other rea­son for delist­ing has been poor share price per­for­mance in a bull mar­ket be­cause of wan­ing mar­ket con­fi­dence.

Lu Yingni, manag­ing direc­tor of EcoLeap, a Lon­don-based con­sul­tancy that ad­vises on Sino-UK deals,

num­ber of main­land com­pany list­ings in Lon­don be­tween 1997 and 2016

stressed that many Chi­nese com­pa­nies listed in Lon­don are rel­a­tively young and small.

They also lack strin­gent cor­po­rate gov­er­nance poli­cies.

“Bad pub­lic­ity re­sult­ing from some Chi­nese com­pa­nies’ fraud­u­lent prac­tices has sig­nif­i­cantly low­ered in­vestor ex­pec­ta­tions, so the will­ing­ness to buy Chi­nese shares is low,” Lu said.

“That cre­ates a vi­cious cycle, mean­ing healthy, high-growth Chi­nese com­pa­nies are less likely to con­sider a Lon­don list­ing,” Lu added.

McLean con­firmed that China City Group will li­aise with Chi­nese reg­u­la­tors, who can then help to su­per­vise main­land com­pa­nies and hold them ac­count­able to in­ter­na­tional in­vestors.

But many in the city of Lon­don doubt that such mea­sures can be achieved.

Xue Haibin, manag­ing part­ner of Zhong Lun Law Firm’s UK sub­sidiary, felt it was un­re­al­is­tic to ex­pect Chi­nese reg­u­la­tors to per­form th­ese func­tions.

“It is a good idea to in­crease dis­cus­sions with Chi­nese com­pa­nies to make sure they un­der­stand best cor­po­rate gov­er­nance prac­tices,” Xue said. “But en­act­ing reg­u­la­tory mea­sures would be too much of a stretch.

“As Lon­don is such a free mar­ket, any reg­u­la­tory frame­works that sin­gle out Chi­nese com­pa­nies would be un­re­al­is­tic,” Xue added.

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