Mainland firms going overseas via HK

As about 60 percent of mainland companies' investments are conducted through Hong Kong, the city is serving as the platform for mainland-listed enterprises to embark on their overseas business expansion plans, Under Secretary for Financial Services and the Treasury Julia Leung said.

Addressing the Chinese Listed-Companies Overseas Summit held in Hong Kong on Thursday, Leung said, "As mainland firms' influences in the city are increasing, these companies can leverage on the Hong Kong platform to strengthen their international connections and establish their brand names in the international market," Leung said.

The Chinese Listed-Companies Overseas Summit was attended by senior Hong Kong officials incharge of financial affairs and numerous chief executive officers from a wide spectrum of Hong Kong-listed mainland companies.

"Approximately 60 percent of the mainland company investments are conducted through Hong Kong. Currently there are 50 mainland State-owned enterprises holding majority stakes of over 100 locally registered subsidiary companies," Leung said.

"As at the end of 2011, 62 mainland financial institutions were operating their businesses in Hong Kong with a combined total asset under management of over HK$265 billion ($34.19 billion), registering a 200 percent surge in the last few years," Leung added.

Besides facilitating overseas business expansion, the Hong Kong platform also enables mainland firms to tap overseas capital through securing listings outside the country's capital market.

Charles Li, the Exchanges and Clearing Limited Chief Executive, said that the mainland companies are playing an important role in the Hong Kong share market.

"Mainland listed companies now account for approximately 60 percent of the total Hong Kong share market capitalization, and these companies' daily trading turnover account for 60 percent to 70 percent of the total market turnover," Li said.

The provision of an overseas fund-raising platform for mainland companies has enabled some mainland banks or insurers to become the world's largest capitalized banks or insurance companies after listing, Li said.

Besides the overseas fund-raising platform, re-exports and the foreign direct investment are also the two important channels through which Hong Kong is contributing to the country's economic reforms.

Li said the long term trend of FDI will more likely take a reverse course: more listed companies on the mainland or in Hong Kong (with mainland background) will pursue overseas acquisitions of corporate shares, technology or other assets, rather than overseas capital investing in mainland companies.

Under Secretary for Financial Services and the Treasury Julia Leung, however, cautioned that there is still a lot of room for improvement for mainland firms to make more overseas acquisitions.

"China is the world's second largest economy in the world. However, the value contributed by mainland companies' overseas acquisitions only account for 5 percent of the country's gross domestic product. This ratio is much smaller than the US' 30 percent, UK's 70 percent and Malaysia's 37 percent," Leung said.

The yuan internationalization process is also facilitating more mainland corporations to engage in the international market in the future. "When the country gradually opens the currency market, it will stimulate domestic capital to buy overseas assets that will unleash the country's influences in the global economy," Li said.

oswald@chinadailyhk.com

 

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Chinese Companies' Overseas Footprint