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Chinese companies prefer to invest at home rather than in US, survey shows

Chinese companies would rather invest at home or in Hong Kong than in the U.S., highlighting the impact of trade tensions between the world's top two economies on boardroom decision-making in China, results of a recent private survey showed.

The survey, conducted jointly by Tsinghua University and auditing firm Marcum Bernstein & Pinchuk LLP during the third quarter, asked more than 1,200 business executives across China where they wanted to have their companies listed. About 66% of respondents preferred to hold their IPOs in Chinese stock exchanges, compared to 18.7% who would rather list in the U.S. market. Even protest-hit Hong Kong was a more attractive IPO destination for Chinese companies according to the survey, Reuters reported Nov. 19.

Leading mainland tech companies have had sizable IPOs in Hong Kong, with Xiaomi Corp. and Meituan Dianping raising $8.9 billion through IPOs in the territory in 2018, according to Fortune. In 2019, Chinese conglomerate Alibaba Group Holding Ltd. debuted in Hong Kong to the tune of more than $12 billion.

Additionally, survey results suggested that Chinese executives have shifted their investment focus from the U.S. to Southeast Asia, Europe and Africa.

"Most executives looking forward are veering away from the United States," Drew Bernstein, co-managing partner of MarcumBP, said in the Reuters report.

The number of Chinese companies listing on U.S. exchanges decreased to 18 so far in 2019 from 26 in 2018 in a trend that could continue, Fortune reported.

Policy proposals coming out of Washington have not been exactly welcoming of Chinese investments. A report published Nov. 14 by the U.S.-China Economic and Security Review Commission recommended restrictions on some Chinese companies' access to U.S. stock markets, according to the Washington Post.

In September, President Donald Trump threatened to delist Chinese stocks from U.S. stock exchanges, something the Treasury Department subsequently denied. In early October, reports surfaced of White House plans to limit government pension investments into China, just after the Commerce Department placed 28 Chinese companies and government entities on a trade blacklist over human rights abuse concerns.

However, MarcumBP's Bernstein said that many Chinese companies still need access to U.S. capital markets for funding. "The truth is that there's not a lot of space in business for politics," Bernstein said. Commenting on recommendations to impose restrictions on Chinese access to U.S. stock exchanges, Bernstein said he believes these would only be part of efforts "to try to improve and ensure the reliability of financial statements of these companies," and were not necessarily political in nature, Reuters reported.

About 71% of Chinese business executives surveyed said they were willing to consider mergers and acquisitions as part of their growth strategy, with a special focus on acquiring advanced technology capabilities.