Despite government efforts, China-Europe stock connects fail to take flight – Bamboo Works
London Courts Chinese Firms Amid Geopolitical Uncertainty
Can a New Labor Government Revive Stalled Listings?
London is rolling out the red carpet for Chinese companies seeking to list on it’s stock exchange, hoping to capitalize on a potential thaw in Sino-British relations under a new labor government.
Jon Edwards, the London Stock Exchange Group’s (LSEG) chief China representative, made a direct pitch to Chinese businesses at a December investment conference in Shanghai. “If you want to develop your business in Europe, or in the Middle East, we think the London Stock Exchange is your best choice,” Edwards said, speaking in Mandarin.
He highlighted the LSE’s global standing,strong liquidity,and diverse investor base,positioning it as a safe haven for companies wary of geopolitical tensions,notably those hesitant about listing in the U.S.
Edwards’ pitch comes as british Finance Minister Rachel Reeves prepares for a visit to Beijing in early January, signaling a renewed focus on strengthening financial ties between the two nations. This follows a recent visit by Shanghai Stock Exchange officials to London, Germany, and Switzerland, further underscoring the desire to deepen business and financial collaborations.
A Rocky Road to Recovery
Despite these efforts, attracting chinese companies to European markets has proven challenging. Programs encouraging listings in Britain,Switzerland,and Germany have yielded minimal results. In 2024, these programs failed to secure any new listings.
Chinese companies cite several reasons for their reluctance.Strict listing procedures in London,coupled with concerns about liquidity in Switzerland,have pushed many towards more familiar offshore destinations like Hong Kong and New York,where IPO markets are showing signs of recovery.
Adding to the complexity, Sino-European relations have been strained in recent years. China’s support for Russia’s war in Ukraine, a conflict where the EU firmly backs Ukraine, has created a rift.
Furthermore, the EU’s imposition of tariffs on Chinese electric vehicle imports, citing unfair subsidies, has raised concerns about trade tensions and their potential impact on chinese investments in Europe. The China Association of Automobile Manufacturers (CAAM) has warned that these tariffs bring “enormous risks and uncertainty” for Chinese operations within the EU.
A “Golden Era” Fades
The Shanghai-London Stock Connect scheme, launched in 2019, aimed to facilitate cross-listings through depositary receipts.It emerged during a period of close Sino-British ties, characterized by booming trade and investment.
However, the program lost momentum after then-Prime Minister Rishi Sunak declared an end to the “Golden Era” with China in 2022.Currently, only six Chinese companies are listed in London under the connect scheme, with the last listing occurring in July 2023 when Zhejiang Yongtai technology Co. floated shares. Other listed companies include Yangtze Power Co. and Huatai Securities. The program has yet to attract any UK-listed companies to sell shares in China.
The future of Chinese listings in Europe remains uncertain.While London is actively courting Chinese businesses, geopolitical tensions and concerns about market liquidity pose notable hurdles. The success of these efforts will hinge on the ability of both sides to navigate these challenges and rebuild trust.
UK Eyes revival of London-Shanghai Stock Connect as china Listing Frenzy Shifts Gears
London, UK – Chancellor of the Exchequer Rachel Reeves is set to embark on a crucial two-day visit to Beijing next month, aiming to rekindle high-level economic and financial dialogues that have been dormant. A key focus of these talks will be the revival of the Shanghai-London Stock Connect, a program designed to facilitate cross-border listings between the two financial powerhouses.
The move comes as the UK government, under prime Minister Rishi Sunak, prioritizes strengthening ties with China. This renewed focus is evident in the potential listing of fast-fashion giant Shein on the London Stock Exchange (LSE). After facing resistance in New York,Shein is reportedly in discussions with the LSE for a listing that could occur as early as next year,potentially raising billions of dollars and marking the largest Chinese company listing in Europe.
Lessons from Switzerland: A Cautionary Tale
However, the path to success for the London program may be fraught with challenges, as evidenced by the experience of the China-Switzerland Connect. Launched in 2018, this program initially saw a surge of Chinese companies listing on the SIX Swiss Exchange. But enthusiasm waned as trading volumes plummeted, leaving many Chinese GDRs (Global Depositary Receipts) languishing with minimal activity.Companies like lepu Medical and Sunwoda Electronic, both listed on the SIX Swiss Exchange, have seen their GDRs trade at significant discounts compared to their Shanghai-listed counterparts. This discrepancy has attracted arbitrage traders who exploit the price difference, further dampening trading activity.
The recent withdrawal of several Chinese companies, including Titan Win Energy and zhejiang Sanhua Clever Controls, from planned Swiss listings underscores the program’s struggles. Both companies cited “changes in market conditions” as the reason for their decision, opting instead to explore listings in Hong Kong, a market experiencing a resurgence in IPO activity.
Frankfurt: A New hope for Cross-Border Listings?
As the Swiss program falters, attention is turning towards germany. The Shanghai Stock Exchange recently led a delegation of Chinese companies to visit not only Britain and Switzerland but also Germany, signaling a renewed push for cross-border listings.
The potential for a frankfurt listing program gained momentum last month when the Shanghai Stock Exchange, Deutsche Börse Group, and China Europe International Exchange signed an agreement for a new stock connect scheme linking Shanghai and Frankfurt.Adding fuel to the fire, Shanghai-listed solar panel manufacturer Jinko Solar announced plans to raise up to 4.5 billion yuan by selling GDRs on the Frankfurt Stock Exchange. This move could pave the way for other Chinese companies seeking access to European capital markets.
The success of the London-Shanghai Stock Connect hinges on addressing the challenges faced by previous programs and creating a framework that fosters genuine investor interest and sustained trading activity.As the UK and China seek to deepen their economic ties, the revival of this program could be a significant step towards achieving that goal.
London Courts Chinese Firms Amid Geopolitical Uncertainty: Can a New Labor Government Revive Stalled Listings?
NewDirectory3.com
London is pulling out all the stops to woo Chinese companies seeking a listing on its prestigious stock exchange. This renewed charm offensive coincides with a potential thaw in Sino-british relations under a new Labor government.
Jon Edwards, the London Stock exchange Group’s (LSEG) chief China representative, presented a compelling pitch to potential Chinese investors [[1] ]. Speaking at a December investment conference in Shanghai, Edwards emphasized the LSE’s global standing, strong liquidity and diverse investor base, positioning it as a safe haven for companies wary of geopolitical turbulence, especially those hesitant about listing in the U.S.
A new Chapter in sino-British Relations?
Edwards’ pitch arrives on the heels of british Finance Minister Rachel Reeves’ forthcoming visit to Beijing in early January,signaling a renewed focus on strengthening financial ties between the two nations. This follows a visit by Shanghai Stock Exchange officials to London, Germany, and Switzerland, underscoring a desire for deeper financial cooperation.
challenges on the Road to Recovery
Despite these encouraging signals, attracting Chinese companies to European markets has proven challenging. Programs encouraging listings in Britain, Switzerland, and Germany have yielded disappointing results in 2024, failing to secure any new listings [[2]].
Chinese companies cite a number of reasons for thier hesitation. Strict listing procedures in London, coupled with concerns about liquidity in Switzerland, push them towards familiar offshore destinations like Hong Kong and New York. These jurisdictions boast burgeoning IPO markets, making them more attractive.
Geopolitical Uncertainties Complicate matters
The China-Europe relationship has faced significant strain in recent years. China’s support for Russia in the conflict with Ukraine, a conflict were the EU firmly backs Ukraine, has created a significant rift.
Further complicating matters are recent EU tariffs on Chinese electric vehicles, citing unfair subsidies. The China Association of Automobile Manufacturers (CAAM) has expressed serious concerns about these measures, warning that they bring “enormous risks and uncertainty” for Chinese business operations within the EU.
The Fading ‘Golden Era’
The Shanghai-London Stock Connect scheme, launched in 2019 during a period of close Sino-British ties , aimed to facilitate cross-listings through depositary receipts. However, the programme lost momentum after then-Prime Minister Rishi Sunak declared an end to the “Golden Era” with China in 2022.
Currently, only six Chinese companies are listed in london under this connect scheme, with the last listing occurring in July 2023. other listed companies include yangtze Power Co. and Huatai Securities.The scheme, intended as a two-way street, has yet to attract any UK-listed companies to sell shares in China.
A Glimmer of Hope?
While London is actively courting chinese businesses, the future of Chinese listings in Europe remains uncertain. Geopolitical tensions and concerns about market liquidity pose significant hurdles.
The success of these efforts will hinge on the ability of both sides to navigate these challenges and rebuild trust.
The coming year will be crucial in determining whether London’s charm offensive, coupled with a potential thaw in Sino-British relations, can revive stalled listings and usher in a new era of cooperation.
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