Shanghai exchange hints at sale of global depositary receipts by Chinese companies in Switzerland amid fraying US-China ties
The Shanghai Stock Exchange will embark on a project that could see the inaugural sale of global depositary receipts (GDRs) in Switzerland by Chinese companies, according to a senior bourse official, amid growing US-China tensions.
“We are preparing to make important efforts in Switzerland going forward and we believe that the first batch of the trial will succeed this year,” Cai Jianchun, general manager of the Shanghai exchange, said in a panel discussion at the Boao Forum in Hainan.
Cai did not elaborate on his statement. The deputy chiefs of the Chinese regulators overseeing the stock market and foreign exchange were in attendance.
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The comment, however, is widely interpreted as a follow-up to a memorandum of understanding between the Shanghai and Swiss exchanges in 2019. The two sides had agreed to study the feasibility of allowing the listing of securities including GDRs on each other’s market. Other possible areas of cooperation included digitalisation.
A link-up with the Swiss exchange would be the third cross-border plan by the Shanghai exchange, which is the biggest in Asia based on the 46 trillion yuan (US$7.1 trillion) of stock capitalisation. It is seen as China’s continuing effort to open up its markets to foreign investors. The local exchange currently has “stock connect” programmes with Hong Kong and London.
The Shanghai-Hong Kong linkage has become a pivotal conduit for two-way flow of capital in and out of mainland China since its inception in 2014.
A Shanghai-London connection, however, has progressed more slowly, partly because of diplomatic rows with Britain over Hong Kong, the Covid-19 pandemic and other issues. Companies including Huatai Securities and China Pacific Insurance have sold about US$6 billion worth of GDRs through the link since 2019.
Diversifying sources of overseas financing for Chinese companies is critical for Beijing at a time when the US is heightening the scrutiny of auditing results that could lead to the delisting of the nation’s biggest technology companies from American exchanges.
Many US-traded Chinese companies are hedging the risk by making secondary stock offerings in Hong Kong. The latest is travel and ticketing firm Trip.com, which joins a list that includes Alibaba Group Holding, JD.com and Baidu.
Serving technology innovation has been at the top of the agenda of the Shanghai exchange, Cai added during the Boao panel discussion. Since its inception in 2019, 262 companies had raised a combined 340 billion yuan on its Science and Technology Innovation Board, known as the Star Market, through March this year.
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