China firms move to poor regions to jump the IPO queue

Updated 2018-03-01 09:39:02 Xinhua

In an attempt to find a shortcut to an IPO, Chinese companies are breaking with tradition and moving from big coastal cities to impoverished small towns inland.

VST Automotive Navigation Co., Ltd. is one of the firms seeking to benefit from fast-track IPOs intended to help tackle poverty.

Six months ago, VST moved its headquarters from the throbbing southeastern metropolis of Shenzhen to Le'an, a previously anonymous impoverished county in east China's Jiangxi Province.

"In 2018, VST expects to generate revenue of 500 million yuan (79 million U.S. dollars) and pay 20 million yuan in taxes,"said Wen Zheng, president of VST, which had been doing very well in Shenzhen. The firm is now recruiting more than 200 staff in Le'an.

Wen, 36, is completely upfront about the reasons behind the relocation. "We plan to go public and moving to an impoverished county will shorten the waiting time," he said.

In September 2016, in what was intended as a purely anti-poverty measure, the China Securities Regulatory Commission introduced policy to help companies in impoverished regions raise funds from the capital market. Eligible companies can skip to the head of the long queue of firms hoping for IPOs on Shanghai and Shenzhen bourses, avoiding years of waiting.

Tanwan Information Technology Co., Ltd. is another potential beneficiary. The game developer moved from Shanghai to Shangrao, another poor county in Jiangxi, in December 2016 and paid 8 million yuan in taxes in the first month.

After tasting the benefits of the new economy, impoverished local authorities are now actively trying to attract such companies.

"Asset-light tech companies like Tanwan do not cause pollution and can help our green transformation," said Gong Hancheng, head of e-government affairs in Shangrao.

Companies like VST and Tanwan can attract both upstream and downstream firms to form a complete local industrial chain, a strong boost for rural economies.

"This is genuine win-win. The poor regions get new growth while the companies speed up their IPO processes,"said Ma Chengzu, Communist Party chief of Shangrao.

It can take years to go public in a big city, said Ma. More than 50 companies have moved from coastal regions to Shangrao to try to take advantage of the IPO policy, he said.

Jinggangshan, home to the Communist Party of China's first rural revolutionary base, has also attracted a group of tech firms.

The benefit of a speedy IPO does not come entirely without cost. When moving inland companies face issues with staff, particularly high-level technicians and managers.

"Our technicians in Shenzhen do not want to move to poor areas. It is impossible to hire similar staff in Le'an, so our research and development center will remain in Shenzhen,"said Wen of VST Automotive Navigation.

Wu Xubo, founder of Tanwan Information Technology, also claimed the lack of talent was a problem.

"It is easier to hire staff in big cities. There is very little Internet talent here in Shangrao," he said.

Zuo Xiaolei, former chief economist with Galaxy Securities, said the regulator should prevent non-qualified firms from raising money through IPOs regardless of where they are based.

"We want companies that have made concrete contributions to poverty reduction to be the real beneficiaries of fast-track IPOs,"said Zuo.

Also in the News

Nicole Kidman Recalls Oscar Glory: Loneliest Time
Showbiz2016/06/16 13:58February 16 2019 03:34:10

Nicole Kidman Recalls Oscar Glory: Loneliest Time

Attending Shanghai International Film Festival, Nicole Kidman talks about her role in "Grace of Monaco".

Labor Day Travel Peak Starts
Also in the News2014/05/01 12:16February 16 2019 03:34:10

Labor Day Travel Peak Starts

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'
Also in the News2014/04/18 13:18February 16 2019 03:34:10

Johnny Depp Delivers a Speech 'Evolve the Future' in 'Transcendence'

Hollywood star Johnny Depp's speech in the upcoming new film "Transcendence" has been disclosed on Friday, April 11th.

China World Business Sports Showbiz Audio
C4 My Chinese Life The Sound Stage China Revealed Showbiz Video Travel Video
China World Fun Travel Entertainment Sports
Beijing Shanghai Guangzhou
Live Music Opera & Classical Movies Traditional Shows Exhibitions
Learn Chinese:
Chinese Studio Living Chinese Everyday Chinese Just For Fun Chinese Culture Buzzwords