• Chinese Investors for US Companies - At the Beginning?
  • April 29, 2009
  • Law Firm: Frost Brown Todd LLC - Office
  • Chinese companies are going global. Lenovo and Haier are well known brands selling in the US, owned by PRC companies. There is a definite uptick in Chinese company acquisitions of non-Chinese assets and companies, a major example of which is Aluminum Corporation of China’s investment in Rio Tinto on February 12 (the largest cross-border Chinese transaction ever). But how about individual Chinese stock market investors? Are they about to be able to invest in stocks outside of China?

    According to an April 6, 2009 China Daily report, Guotai Asset Management, a major Chinese investment management firm, has signed a licensing agreement with NASDAQ (US). The object is to develop a NASDAQ-100 index vehicle that will be made available to Chinese purchasers within China. The China Securities Regulatory Commission must approve the deal, and this could take several months.

    An index fund pegged to the US NASDAQ 100 would follow a program approved three years ago – the Qualified Domestic Institutional Investor program. This vehicle allows specific PRC institutions to offer funds that invest in non-Chinese securities. China Daily reports that over US$40 billion has poured into these foreign-invested funds (out of about US $3 trillion of Chinese personal savings). Foreign investment into Chinese securities is of a far greater magnitude than this.

    These initiatives do not mean that Chinese residents will soon be able to buy directly 100 shares of GE or other foreign companies, or that a US company could do an IPO on the Shanghai exchange. Such truly global capital markets are a distant dream. But we are witnessing a continuous opening of China’s large pool of investment capital to beyond China-only.