Foreign investors benefit from Chinese firms
(Xinhua)
Updated: 2005-03-24 09:23

Foreign investors who bought stocks in China's State-owned enterprises that are listed abroad profited in 2004, a report of the Economic Information Daily said. The Shanghai and Shenzhen stock exchanges issued 98 new shares and collected funds totaling about US$4.27 billion, a record low since 1997. The 84 State-owned enterprises listed abroad raised funds worth US$11.15 billion through issuing B-shares overseas, the report said.

PetroChina Lubricating Oil Company announced recently in Hong Kong that its net profit last year reached 102.9 billion yuan, up 47.9 percent. This accounted for almost 22 percent of the total earned by the enterprises controlled by the central government.

According to the company's financial report, its business turnover reached 388.6 billion yuan in the year 2004, an increase of 27.9 percent over 2003.

Sinopec Corporation, the country's largest energy and petrochemical company, attracted foreign investors such as BP, Royal Dutch Shell and Exxon when it was listed in Hong Kong.

Exxon reportedly earned HK$11.2 billion in profit from buying and selling stocks of the Sinopec and BP also earned HK$10.8 billion from buying and selling shares of Sinopec and Petrochina.

The net profit of China's largest steel manufacturer Baosteel, one of the four largest enterprises listed domestically, was 9.39 billion yuan in 2004, its annual report said. Its sales income was 58.638 billion yuan last year.

Experts warned that the yuan-denominated A shares face the risk of being marginalized by the foreign-currency B shares. They worried that the function of the A-share stock market is declining. The long, complicated procedure for enterprises to get approval for domestic listing encouraged enterprises to look to the overseas market, they said.

By the end of 2004, the circulated value of the enterprises listed abroad reached 2,209.8 billion yuan, while the circulated value of the stocks in Shanghai Stock Exchange and Shenzhen Stock Exchange stood at 1,200 billion yuan.

The enterprises listed overseas are usually large state-owned enterprises with good economic performance at home and are carefully chosen by the government, experts said.

They attributed the bad performance of the enterprises listed domestically to the problem of split share structure that have been plaguing the sector for several years.

The split share structure resulting from the planned economy refers to the existence of a large volume of non-tradable shares owned by the state and owners of the listed companies. This means that only about one-third of the shares in domestically listed companies float on the market.

The structure puts public investors in a worse position than the actual controllers of the listed companies.

Securities officials said 2005 would be a major turning point for Chinese capital markets, indicating that measures would be taken to solve the structural problems of the markets.

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