Money

Shanghai exchange prepares for int’l board

By Gao Changxin (China Daily)
Updated: 2011-06-08 10:30

SHANGHAI - All the preparation for a long-awaited international board on the Shanghai Stock Exchange is "basically" in place, Shanghai's vice-mayor said in a speech, giving the clearest sign yet that the board's launch is imminent.

"All the conditions for the board have basically been put in place. Next we will see the willingness of companies. The board will be put in place when the conditions are right," Tu Guangshao, who is in charge of Shanghai's finances, said on Monday night.

"We feel it (the board) is coming soon," Tu said, without disclosing a timetable.

Li Kefei, managing director for global capital markets at UBS Securities, said he thought the exchange will possibly launch an international board this year.

Related readings:  Coca-Cola considers listing in Shanghai  Shanghai, US to set int'l board rules  Int'l board to be yuan-denominated  Shanghai's Int'l Board prepares for trade

The international board would be the first marketplace in China allowing overseas companies to offer yuan-denominated shares to domestic investors. The country's plan for the board surfaced in 2009 as part of a broader move to internationalize its currency and help Shanghai become a global financial hub by 2020.

Discussions and speculation over the board have been continuous over the past two years, underscoring investors' enthusiasm for the idea.

While many government officials have spoken openly about the introduction of such a board, none have yet made it clear when it would happen. Shang Fulin, chairman of the China Securities Regulatory Commission, said at a financial forum in Shanghai last month that it is "getting nearer and nearer".

More than 60 companies have expressed their intention to list on the board, the Securities Times reported last month. To do so, they would be required to have market capitalization of at least 30 billion yuan ($4.63 billion) and 3 billion yuan in profit over the past three years, the newspaper said, citing anonymous sources.

Tu said regulators' preparations for the board have focused mostly on the regulatory framework and techniques and accounting standards.

"For foreign companies to land on the board, you have to have a set of regulations. We need time to complete some specific adjustments for foreign companies to better adapt to our regulations," Tu said.

Regulators should also reach agreements with their foreign counterparts on how to deal with foreign companies in case of irregularities.

Sun Lijian, vice-dean of the School of Economics at Fudan University, said a sound set of regulations is essential, as inadequate supervision of the board could endanger China's financial stability.

"Launching an international board to an extent equals a further opening up the nation's capital account," he said. "A more convertible yuan has its benefits, but it also exposes the currency to speculative activity and might incur financial instability."

Sun suggested that funds raised through the board should be tracked to guard against speculation.

Tu said time is also needed to resolve the difference between domestic and international accounting standards. He said that though the Shanghai Stock Exchange has increasingly adopted international accounting standards, some differences remain.

"Launching the international board is not easy - it requires many conditions," Tu said. "The board will come when the conditions are right I think it will be soon."