Chinese firms eye 'unexploited gold mine' in Europe

By Li Xiang| (China Daily Europe)| Updated : 2018-06-01

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As China opens the door wider to its capital market to attract foreign capital, Chinese companies are also sensing greater freedom to go abroad and raise funds from overseas investors.

Appliance maker Qingdao Haier Co is set to become the first Chinese company to list its shares on the Frankfurt, Germany-based China Europe International Exchange, or CEIE.

Sometime this year, it will make its initial public offering, known as the D-share listing ('D' stands for Deutschland, or Germany).


Visitors to the international appliances expo at Berlin last year walk past Haier's booth. Haier is set to become the first Chinese company to list its shares on the Frankfurt-based CEIE. Xinhua    

Haier's listing could come as early as July. The company is seeking to raise about 1 billion euros ($1.2 billion; £0.9 billion) by selling up to 460 million shares to investors, according to the CEIE and a Haier statement.

Established in 2015, the CEIE is a joint venture between the Shanghai Stock Exchange, Deutsche Boerse AG and the China Financial Futures Exchange.

CEIE officials say the D-share market could be an "unexploited gold mine" for Chinese companies seeking to float shares in overseas markets.

While companies will need to obtain approval from Chinese and German regulators, the process for a D-share listing could be completed within six months, much shorter than the Chinese listing process, according to Chen Zhiyong, executive director of the CEIE.

More Chinese companies may follow in the footsteps of Haier. The CEIE is in talks with more than three Chinese companies for potential D-share listings, according to Chen.

The China Financial Futures Exchange, a shareholder of the CEIE, said earlier that it is also mulling a plan to launch renminbi-denominated D shares.

Anticipated D-share listings by domestic companies appear to highlight the desire of Chinese regulators to broaden their fundraising channels.

Another main objective is to support the internationalization of the renminbi and to offer financing infrastructure for the Belt and Road Initiative.

"We hope that the market will turn into an overseas platform for renminbi-denominated assets," Chen says, adding that the CEIE also hopes to serve as a bridge between Chinese and German manufacturing companies for business partnerships.

To be qualified for a D-share listing, Chinese companies must be good-quality blue chips with a clear international business strategy. Companies are also required to have a presence in Europe or plans to invest there.

Their business must also be related to the Belt and Road Initiative or the high-end manufacturing sector, according to the CEIE.

For instance, Haier is already listed on the Shanghai Stock Exchange and is considered a blue chip among the A shares, being a prominent maker of high-end appliances. It earns nearly half of its sales revenue from overseas markets, including Europe.

Ji Min, an analyst with China Merchants Securities Co Ltd, says D-share listings could help boost awareness and sales of Chinese brands in Europe.

"It could also help the Chinese companies concerned to carry out cross-border acquisitions, improve their international competitiveness and explore low-cost and more efficient funding channels in overseas markets," Ji says.

Given the recent unease in China-US trade relations, many investment-minded Chinese companies are eyeing the European market, while others are seeking to raise funds and carry out mergers and acquisitions in Europe.

"The planned D-share offering will help us increase our brand visibility in Europe," Xing Xiaoming, Haier securities department spokesman, was quoted by Bloomberg as saying in an emailed response to questions. "We will expand our business activities in Europe afterward through both organic development and complementary M&A."

To facilitate overseas listing of Chinese companies, stock exchanges on the mainland have been seeking partnerships with their overseas counterparts. Toward this end, the Shanghai and Shenzhen stock exchanges have picked up stakes in bourses in Karachi, Pakistan, and Dhaka, Bangladesh.

(China Daily European Weekly 06/01/2018 page27)