What Should We Pay Attention To When Local Enterprises Start Listing Overseas?

This paper is a speech delivered by Mr. Wang Zhansheng, director general of PWC global capital market, at the Z-club eighteenth Technology Venture Investment Forum, "local entrepreneurs' overseas listing forum". Mr. Wang Zhansheng, director general of PWC global capital market, director general of the Ministry of foreign affairs, has just talked about some requirements and ways of overseas listing of enterprises. I just want to talk about some feelings in my work.

Over the past few years, most of my work has been to help companies from different countries to invest in international capital markets, especially in the US capital market.

Three years ago, after working in New York and London for several years, I came to Hongkong and moved to Hongkong from Beijing just two months ago.

Just now, you have talked about the different listing rules in different places. There are different laws and regulations, and there are many specific regulations to be satisfied.

There is no doubt that these are real existence, and bring great difficulty to the listing.

Today I may be more realistic.

In front of several experts at the enterprise level to talk about the listing, everyone seems to have a choice.

You can choose to sell shares in domestic A shares or B shares, or you can choose to go overseas to Hongkong or Singapore or the US.

For many companies, they are faced with such a choice, though each option is difficult.

However, from a macro perspective, Chinese enterprises, especially private enterprises, have little room to choose as a concept when they enter the international capital market.

Economic analysts and some foreign investment banks have made a prediction that if China's current development speed and scale, in the next 10 years, China needs more than $five trillion in capital.

I compare several other figures with this figure and find that the total value of the stock market in China and the total balance of all the existing loans of the bank are still far less than that of China's funds. What's more, the balance of bank loans I just mentioned is just a cumulative amount.

In fact, with the reform of China's financial system, the banking sector will tighten up and the scope of loan increments will decrease.

Therefore, from a macro perspective, China's sustainable development in the next 10 years or even longer will be more and more dependent on the international capital market.

So, from this concept, we have no choice!

On the issue of entering the international capital market, every enterprise will encounter many difficulties and need to satisfy too many demands. But if you start today or you have been working hard, you will realize your ideal one day.

Experts mentioned earlier that there are too few enterprises like UT and AsiaInfo.

But before these enterprises grow and grow, they are also doing zero or one steps.

I think we should have confidence in ourselves.

This is a crucial first step.

Here, I want to quote a view of Mr. Fei Zhengqing, an American Sinologist. He said that China's modern history of nearly one hundred years is a history of China's continuous search for its own position as a nation and a country in the process of constantly colliding with western culture.

I would like to borrow his statement that the rise and fall of Chinese enterprises in the next few decades will be the result of an exchange and collision with the international capital market and the international operation.

Of course, we will encounter many difficulties and many challenges, but this is the only choice that is inevitable.

In addition, I would like to mention that although the international capital market is a turning point for us, it is also the only way to go.

At present, there are still considerable difficulties. Chinese enterprises began to enter the international capital market from the beginning of 90s, first in Hongkong, and then in the United States.

I remember the first time I met Mr. Wang Chaoyong of Chung Li Li in 1994.

That's in New York.

At that time, China Eastern Airlines was listed in the United States. At that time, a number of Chinese enterprises entered the international market.

In the early 90s, the concept of "China fever" appeared.

Entering the board of directors does not mean that China seems to have a sense of ignorance of Commerce.

At that time, Chinese fever could be listed as long as it was Chinese enterprises.

After that stage, everyone became relatively rational and objective.

At present, most of the enterprises listed abroad are not very optimistic about the performance of the stock market, and investors are not closely following them.

From the middle of 90s to the present, the mainstream of local enterprises listing overseas has gradually become an industry, and some monopolistic enterprises with certain advantages have entered the international capital market.

These include some enterprises in telecommunications, energy and so on. I personally believe that although the reputation and image of private enterprises, especially private high-tech enterprises, have not yet been established in the mainstream international market, they will be the direction of China's economy and pillar industries in China's future. The completion of this lap up process will be quite challenging and, of course, also an opportunity and a trend of the next wave. I hope this trend will come sooner.

At that time, we hoped that a large number of new large-scale private high-tech enterprises would go to the best capital markets in the world by going through the backdoor or buying the shell and listing.

I think this day is the direction of our efforts, and it is also a mission that we are here to do.

There are a lot of things happening in the capital market at present. We may all know about Enron, but some may think that what happened in the US is far away from us, but in fact, this is not far away.

After the Enron incident, President Bush signed a new bill, accounting reform and Investor Protection Act, in July 30th. This bill is the most profound and far-reaching historical reform in the seventy years since the establishment of the securities market regulatory framework in the United States. The reform is being launched in the United States and will spread to the world's major capital markets.

A few weeks ago, the China Securities Regulatory Commission convened a meeting to discuss the impact of the US reform on China and some possible countermeasures China might take.

At this point, I really appreciate the efforts made by the China Securities Regulatory Commission.

Perhaps some measures will be very seriously considered by the domestic industry, including the government and regulators, in the near future.

It is estimated that there will be many reforms that will affect all of you here. I would like to briefly mention a few of them.

As we all know, the early Enron incident was a financial problem, which was much more than financial problems.

After the Enron incident, at a survey meeting, Enron Corp's CEO answered questions from members of the United States Congress, saying, "I am not an accountant, I don't understand finance. I rely on my accountant, Andersen, to help me with my accounts, and I know nothing about them, so I can not take this responsibility."

Another member of Parliament asked him on the spot: "as a CEO of such a large company, where did you learn business education? Where did you get your MBA?"

He said he was MBA of Harvard.

At that time, I thought the possibility of Harvard education was not very big. So what exactly was the problem?

After two days, the discussion in the US capital market has aroused great repercussions.

As a model for investors, Mr. Buffett put forward at a meeting two days later: the company's financial report, the ultimate responsibility and ultimate responsibility of information disclosure is the company's CEO.

This responsibility is unshirkable. The company CEO should be equivalent to CDO, the chief executive of information disclosure.

In China, I find that some people think that financial work is a form of work in the capital market. Many laws and regulations will also require enterprises to go on the market to sign financial reports, and enterprises can go public with the approval report.

In fact, these events and the series of results produced by the US capital market prove far more than that.

Accountants should always do this work from zero to IPO, but in China, many state-owned enterprises and non-state-owned enterprises are listed on the stock market when they are ready to go public.

In this regard, China is a characteristic compared with most other countries in the world, but it is not necessarily a positive feature. For example, a software company in China has been very successful.

During the vigorous development of the company, many people told him that his company should go public.

As a result, the company began to prepare for the listing. They found banks and lawyers, and they spent a lot of time discussing the structure of the listing. However, the accountants who just intervened put forward an accounting principle for the company's finance.

Generally speaking, accounting principles can be used as the rules of commercial language. It has strict grammar and strict diction requirements. We usually call GAAP, which is not a simple language problem.

What was the problem with the accounting principles of the software company at that time?

Companies are eager to cash in selling software, and they sell a lot of software to customers, and then promise to upgrade their customers free of charge.

It was quite normal.

But in accounting principles, we have to figure out what the buyer pays.

Is it the current version of the software, or the right to unlimited upgrade?

If there is no change in time, customers can ask for unlimited upgrading. From the accounting standards, there is no definite income figure. If a good story lacks good accounting principles, it will not be possible to go public.

That's why accountants' participation starts from scratch rather than from IPO.

When I worked in China, I still had a bit more profound experience.

I encountered many enterprises, whether state-owned or private enterprises, they rarely talk about integrity in the listing process, instead, they generally pay attention to what is the regulation and how to do according to the requirements of the regulations.

This is actually the minimum requirement. In the current capital market environment, investors' expectations far exceed this point.

For example, options are an important motivating factor in the process of listing overseas. For overseas listed companies, options can better motivate everyone to do the job.

On the issue of options, whether the US is still in Europe, the accounting treatment of options is a controversial issue.

The accounting method of options has two kinds of accounting principles in the United States. One is the difference between the purchase price authorized by the option and the market value of the stock, and the other is based on the value of the option itself.

The former is adopted by most enterprises in the past, usually resulting in lower option cost and higher profit, and the latter is the opposite.

After the Enron incident, the remuneration of management in the United States is a topic of great concern. Even some prominent figures in management have been attacked.

In such an environment, although two methods of accounting principles can be done, some companies have begun to voluntarily calculate them according to the high cost method, which helps to establish a good image of management.

At this point, I think a company should expect its company to develop in the long run, rather than want to buy a shell, or want to quit like venture capital.

As a business operator, you can't just quit. For example, in Hongkong and other international capital markets, management is not allowed to sell or pfer shares within a certain period of time.

In the end, I would like to give you a piece of advice. Before you are ready to go public, you have to ask yourself three questions: first, how is the regulation stipulated? Do I comply with the requirements of the regulation? Second, how do I request the accounting principles? Do I conform to the requirements of accounting principles? Third, what is the investor's expectation of me, and how can I establish a management system that is most suitable for establishing the company's long-term credit?

If these three answers are correct, the company's Evergreen Foundation will have a foundation.

Mr. Wang Zhansheng, director general of PWC global capital markets, has been stationed in Beijing since August 2002 and is responsible for assisting the Asia Pacific region, especially for the Greater China circle.

Mr. Wang has worked in Hongkong for nearly three years, and has been consulting many times to assist high-tech companies in listing and large state-owned enterprises to share shares in the stock market.

During this period, the management consulting projects mainly included the listing of Bank of China (Hongkong) in Hongkong in 2002 and private equity in the international capital market; PetroChina listed on the New York and Hongkong stock exchanges in 2000; the Limited by Share Ltd of China aluminum was listed on the New York and Hongkong stock exchanges in 2001; Taiwan Lianhua Electronics (UMC), the world famous semiconductor company was listed on the New York stock exchange in 2000; the Taiwan silicon precision industry Limited by Share Ltd (SPIL), the world famous semiconductor packaging and testing company was listed on NASDAQ in 2000; the Korean National Bank (Kookmin), the largest bank in Korea, was 2000