US-Listed Chinese Firms Flock Home to Take Advantage of Bull Market · Global Voices
Jack Hu

Many U.S listed China Concept Firms are returning back to Chinese A-Share Market. Photo from flickr user: Marc van der Chijs (CC: AT-SA)
Lured by China’s soaring stocks of late, many US-listed Chinese firms are rushing back to the mainland to enjoy the bullish spree, even after the market suffered a recent dramatic fall.
More than 20 Internet corporates are lining up to return to China's A-share market. Their desires have been further fueled by an announcement from Beijing that ownership limitations for foreign investors will be lifted, a big move to dismantle the complicated variable interest entity structures (VIE) for most US-listed Chinese companies. VIE is when a corporate has an operating company based in China and a holding company based abroad, which allow it to skirt rules that prohibit foreign investors from having direct control over Chinese companies that work in sensitive industries such as the Internet, education and telecommunications.
The rule has changed. China will now allow full foreign ownership of some e-commerce businesses, with the aim of encouraging foreign investment and the development and competitiveness of the industry.
Qihoo 360 Technology, an Internet security software maker listed in the United States in 2011, said it received a buyout offer from a consortium led by CEO Hongyi Zhou. Valued at about $8.6 billion, it is thus far the largest tech company to receive a “go-private” offer in recent months. The “go-private” proposal, if successful, will privatize the company and delist it from the U.S stock market.
A string of smaller Chinese companies, such as Renren, 21Vianet Group and E-House China Holdings, have all received “go-private” bids in recent weeks. Tech executives at several Chinese companies are betting on higher valuations back home, where stock markets have been on fire for some time.
Thomas Luo, founder of a tech review platform Pingwest pointed out in his column that well-established companies would not leave the global market to join the a share game:
你知道这些资本游戏充满了诡异的烟幕，但只要趁早置身其中，一定会大有收获——这就是中国概念股回归A股市场的硬道理。企业家们愿意从中分一杯羹，他们背后那些尚未退出的风险投资商更喜欢。而另一方面，这些先后从美国退市的“中概股”，在美国资本市场的故事越讲越艰难——几乎所有从纳斯达克和纽交所“私有化”的中国互联网公司，股价差不多都是一条条颓败的曲线。
The capital game is filled up with smog. But if you enter early enough, you will win — this is the logic in the return of China concept firms to the A-share market. The entrepreneurs want to have a share and the capital investors love risking for profit. On the other hand, these China concept firms, their paths in the US capital market have been difficult. All the “privatized” Chinese Internet firms that listed in Nasdaq and the New York stock exchange, the curves of their stock prices were all moving downwards.
China Concepts Stock is a term widely used in the finance sector to describe a set of stock of companies whose assets or earnings have significant activities in mainland China.
Tan Yifei, a finance news reporter, composed a satirical poem to describe the situation on Chinese Twitter-like Weibo:
天边飘过A股的风 它不停的向我召唤 当身边的土豪轻轻走过 有个声音在对我呼唤 归来吧归来哟 浪迹天涯的中概股 别再四处飘泊 故乡人傻钱多 归乡路再漫长又如何 当身边的微风轻轻吹起 吹来故乡土豪的味道 归来吧归来哟 浪迹天涯的中概股 归来吧归来哟 我要成为土豪 我要成为土豪 眼里是酸楚的泪
A-share wind flies across the sky, it keeps calling me. When local tyrants pass by, a voice keeps calling me, return return return. China concept firms wander around the world, don't float around anymore. So much easy money in their hometown, no matter how difficult, they return home. The wind blows around, brings the smell of local tyrants, return return return. I want to be local tyrants, I want to be local tyrants, eyes fill up with tears.
China's ChiNext composite index has soared more than 150 percent so far this year, eclipsing the 27 percent rise in the Nasdaq China Technology Index. Firms listed on the Nasdaq index get an average share price equal to 11 times their earnings, while on ChiNext they get above 130 times.
The China Securities Regulatory Commission (CSRC) has required any company to be profitable for several years before listing – a rule which excluded most Chinese Internet companies. But now profitability requirements are being eased, and there's a shortcut: a merger with a Chinese company with a listed shell.
Chinese display advertising giant Focus Media, which bailed out of New York in 2013, has planed to relist in China via a $7 billion reverse merger with rubber manufacturer Jiangsu Hongda in what analysts say is a model for returnees to follow.
Chinese companies can circumvent the stricter regulation and supervision in the US by getting listed on China's A-share market. Except for seeking more money in the stock market, those companies are also trying to stop disclosing dissatisfactory financial reports to the public.
Since 2006, “China concepts stock” in the US has suffered a credibility crisis and quite a number were under investigation by the Securities and Exchange Commission for accounting fraud.
Pi Haizhou, a well-known financial author, warned of the negative effects of the return of China concept firms. What they are pursuing are higher price-earnings ratios and speculation other than standard management.
中概股回归A股，图的就是A股的高市盈率与A股市场的投机性，而并非是股市的规范管理，这样的出发点本身就是不正确的，并不利于A股市场的发展。
The intention for China concept firms in returning to A-share is venture seeking in a speculative market rather than standard management. Such an intention is wrong and is not good for the development of A-share market.
No wonder ordinary Chinese netizens are not excited about the wave of returnees:
租车人_石磊: 中概股回归A股？？美国人不好骗，他们在美国左右不了主流媒体，他们不敢造假，他们忽悠不了政府！他们更无法逃避美国资本市场的监管！所以他们要回归，因为这些在中国只要你有钱都不是问题！海外实在混不下去了！回家骗亲人来了哈！
“Car renter Shi Lei”: China concept firms return to A-share?? Americans are not easy to cheat, they can't control the mainstream media, dare not fabricate [finance reports] and cheat the government in the US. They can't escape the management of the US capital market, that's why they have to return. In China, if you have enough money, they don't have to face these problems. They can't survive overseas and come back to cheat their relatives.
西区电台: 中概股回归的构思起于本朝新政，好几年了，说白了是用国内资金替一系列垃圾赎身，让他们赚两道钱，而美好的题目是回归祖国怀抱。这些公司当然希望离开监管严格的美国，荣归故里，假装委屈，讨价还价。蠢死了。
“West district radio station”: The whole idea about the return of China concept firms is the new policy of the current ruling bloc. It has been planned for a few years. In a nutshell, they use domestic capital to buy out the trash, let them make two rounds of profit and return to the motherland. These firms, of course, want to escape from the strictly managed US market and return home in honor. They pretended they were not that eager to return so as to lobby for a better price. A bunch of fools.