Business & Economics
Despite the recent trade dispute, decades of increased trade between the U.S. and China have given Chinese companies more opportunities to list on foreign stock markets, so they can find better financing opportunities in foreign markets. With the rapid development of the Chinese financial industry and the continuous spread of news on various company listings, why is it that many Chinese companies choose to list overseas, especially in the U.S. and Hong Kong, but not in China? In addition, what is the difference between the U.S. and Hong Kong exchanges, and how does that difference affect Chinese companies’ choice of listing location? I propose that this is largely because the Chinese government has imposed relatively strict constraints on its stock exchanges, such as strict requirements for the profit ability of listing firms, and requirements that the company have a good background with the government. Thus, it makes a lot of Chinese companies choose to list on foreign exchanges. The weaker restrictions of the U.S. and Hong Kong stock exchanges greatly influence the decisions of Chinese companies to list abroad.
The Hong Kong exchanges provides firms with investors who have an understanding of Chinese companies and easy listing requirements relative to mainland China, while the U.S. exchanges offer a more open market system, which means more investors, faster listing speed and fewer restrictions than in Hong Kong to attract a large number of Chinese companies to go public successfully.
Yin, Chenyu, "The Path of Least Resistance: How Strict Chinese Stock Market Regulation Incentivizes Chinese Companies to List in Foreign Stock Exchanges" (2018). Business and Economics Summer Fellows. 7.