Investment

Deal could bridge foreign funds to Chinese firms

By Wu Chong
Updated: 2010-08-10 16:27

NEW YORK - A unique partnership between a department of the Chinese government and an investment bank in the United States aims to educate and instruct China's private small- and medium-sized enterprises (SMEs) on better approaches to the US capital markets.

China's international cooperation center of the National Development and Reform Commission, along with the Rodman and Renshaw investment bank both agreed last month to support China's private financing activities and business development of the SMEs in the US capital markets, including mergers, acquisitions and transfers of technology.

In a statement, Zhang Xiaochong, director of the center, said that this partnership will bring global market leaders into China to enforce "international-standard corporate practices and competitiveness" for Chinese companies.

"Unlike larger Chinese enterprises, these smaller Chinese companies may have more difficulty accessing capital within China and, as a result, many such companies would look to the US capital markets as an alternative avenue from which to fund their growth strategies," said Tariq Jawad, managing director of China Investment Banking with Rodman and Renshaw, in a statement. "While there already exists a number of Chinese companies listed in US capital markets, many of them do not efficiently utilize nor fully appreciate the financing options available to them."

Further, he added, several of the existing Chinese companies listed in the US "suffer from inadequate investor communication and corporate governance that restrict their ability to fully tap available capital."

Jackie Kazmerzak, chief financial officer at China Info Securities, shares Jawad's view. "There is a lot of disconnection between the actual environment (here in China) and perception from the US investors due to the physical distance," she said.

China Info Securities, headquartered in Shenzhen in southern China's Guangdong province, is a small-cap company providing digital solutions to systemize geographic or medical information. It went public on NASDAQ three years ago.

"We (SMEs) are not as well known to US investors, so we need more explanations, more effective communication to reach out to a broader audience," Kazmerzak said.

On the other hand, she pointed out, US investors tend to make investment decisions based on China's macro-policies. "But in reality, we (SMEs) may not be that impacted by these policies. I hope this partnership can bring a better understanding of each side."

With a focus on China's financial markets in recent years, Rodman and Renshaw has more than 50 Chinese companies under its research umbrella. The company is expected to input its extensive advisory network, which includes lawyers for the US Securities and Exchange Commission and the Chinese government, corporate accountants and investor relations firms, into this new partnership.

The US capital market has become increasingly appealing for Chinese companies, particularly SMEs.

A recent report from NASDAQ shows that there are148 Chinese companies listed on NASDAQ, with 125 from the mainland. The majority of these companies are in the education or technology sectors.

For the first seven months of this year, 25 additional Chinese companies went public on NASDAQ. Thirty-three firms had new listings from China last year.

In a press briefing two months ago, Eric D Landheer, head of Asia-Pacific division of NASDAQ QMAX Group, said he believed that China will be "opening up more" in the future and therefore provide "tremendous opportunities" for its SMEs to reach foreign capital.

He added that many Chinese companies which are listed on NASDAQ, such as Baidu and Sina, all started as small enterprises.

China Daily