Plans moving forward to enable foreign firms to list in Shanghai

BEIJING, May 13-- China is advancing its study of plans to allow
foreign companies to list on the Shanghai Stock Exchange and may work out
preliminary arrangements as early as this year, industry sources said yesterday.

The country is expected to step up communications with other nations in the
coming months on the development of an international board in the city after
concluding a deal with Britain on Monday for further stock-market reform, the
sources said.

"China agrees to allow qualified foreign companies, including United
Kingdom companies, to list on its stock exchange through issuing shares or
depository receipts in accordance with relevant prudential regulations," the two
countries said in a joint statement issued on Monday.

The agreement, reached by Chinese Vice Premier Wang Qishan and British
Finance Minister Alistair Darling following a meeting in London, is set to pave
the way for large British companies like HSBC to sell shares in Shanghai.

HSBC said in a statement yesterday that it "would like to be the first
foreign bank to list in Shanghai if the authorities allow," and is working
toward that goal. It did not give a specific timetable for a stock sale in the
city.

Peter Wong, executive director of HSBC subsidiary Hongkong Shanghai
Banking Corp, said earlier this month that a Shanghai listing would consolidate
HSBC's brand influence and raise funds for expansion in the Chinese mainland
market.

Two years ago, China started to consider permitting foreign companies to
issue yuan shares to help boost the status of its fledgling stock market on the
mainland. But the program has proceeded slowly as regulators worked to ease
investor jitters over a stock glut.

Program revived

The project entered the spotlight again after China's State Council issued
a guideline in late March allowing Shanghai to prepare for allowing overseas
companies to sell yuan-denominated shares and bonds on the city's bourse.

Other companies including Hong Kong-based Hang Seng Bank and the Bank of
East Asia have also publicly expressed an interest in listing shares in
Shanghai.

"Apparently, the program was revived," said a Beijing-based brokerage
executive close to the China Securities Regulatory Commission. "Preparatory work
will be paced up, with the initial arrangement likely to be settled by year
end."

Industry insiders said any public stock sale by an overseas company would
not be likely to occur until at least late next year as there's a great deal of
work to be done.

One key obstacle for foreign companies is that they will have difficulty
switching the proceeds of their mainland listings into other currencies and
repatriating the money as the yuan is not fully convertible.

Hu Xiaolian, head of China's foreign exchange regulator, indicated in
London on Monday that the country won't likely move quickly to free up the yuan
under the capital account.

(Source: Shanghai Daily)