Chinese companies withdrawing from American stock exchanges

Regulations, accounting are at issue

Associated Press

BEIJING — Just a few years after Chinese companies lined up to sell shares on Wall Street, a growing number are reversing course and pulling out of U.S. exchanges.

Focus Media Holding Ltd. recently announced its chairman and private equity firms want to buy back its U.S.-traded shares and take the Shanghaibased advertising company private. Smaller companies also are withdrawing from U.S. exchanges.

In a sign of official encouragement, a Chinese business magazine said a state bank has provided $1 billion in loans to help companies with listings abroad move them to domestic exchanges.

The withdrawals follow accusations of improper accounting by some companies and a deadlock between Beijing and Washington over whether U.S. regulators can oversee their China-based auditors.

Some Chinese companies say they are pulling out of U. S. markets because a low share price fails to reflect the strength of their business. Withdrawing also eliminates the cost of complying with American financial reporting rules.

Focus Media “has been seriously undervalued on U. S. stock markets” and being taken private will help to promote its “longterm strategic development,” said a company spokeswoman, Lu Jing.

The company, formed in 2003, operates electronic advertising displays in elevators, grocery stores and other locations.

U. S.- traded Chinese companies faced scrutiny after auditors for several quit and others were ac- cused of accounting irregularities. Concerns about company finances have caused share prices to tumble, costing investors several billion dollars.

“Probably all these companies have some questionable accounting, so they may prefer to move out of the U.S., not to come under too much scrutiny,” said Marc Faber, managing director of Hong Kong fund management company Marc Faber Ltd.

The status of Chinese companies in America could be complicated by a dispute between U.S. and Chinese regulators over whether American inspectors will be allowed to examine the work of their China-based audit firms.

Washington wants auditors to hand over documentation on companies that are under investi- gation, but Chinese authorities have barred the release of some information. If a settlement is not reached, the SEC could reject audits by China-based firms, forcing companies to find new auditors.

In May, Beijing took steps to tighten control of local affiliates of major accounting firms by issuing a requirement for Chinese citizens to head those offices.

Dozens of Chinese companies issued shares on Wall Street over the past decade, raising billions of dollars from investors who wanted a stake in the country’s booming economy.

Many were private companies that could not raise money on Chinese exchanges that were created to finance state industry or wanted the higher public profile.

Chinese regulators encouraged the move as a way for entrepreneurs to raise money and speed development of China’s economy. But in recent years Beijing has encouraged private companies to issue shares in China to help develop its markets and give Chinese households better investment options.