China firms raise over US$20 billion through stock listings in Hong Kong
China’s second largest online retailer JD.com raised almost $4 billion from an Initial Public Offering (IPO) on the Hong Kong Stock Exchange on 18 June 2020. Several other firms that are based in China are now preparing similar listings in Hong Kong.
The listing of JD.com was the second biggest of 2020, after the Beijing-Shanghai High Speed Railway raised $4.3 billion in January. It also followed hot on the heels of the Hong Kong debut of Nasdaq-listed gaming giant NetEase, which raised $2.7 billion. Last November, Alibaba, which is listed on the New York Stock exchange, became the first of the US-traded Chinese companies to debut in Hong Kong with its $13 billion secondary listing.
Ling Chenkai, Vice-President of JD Retail said the listing was “a big thing for JD” because it would help to promote the brand in the Greater China area. “It also can help those Chinese investors and Asian investors to understand JD better and more clearer which can help us to gain trust from those investors and customers.”
The renewed interest from Chinese companies in Hong Kong’s stock market comes as concerns grow that Beijing’s imposition of a national security law in the city may have implications for Hong Kong’s trading privileges under US law. A Hong Kong listing will help to diversify the risk for such entities and ensure that, should US-China trade relations take a turn for the worse, they will have alternative arrangements in place to access capital markets.
“The Chinese Communist Party’s decision to impose draconian national security legislation on Hong Kong destroys the territory’s autonomy and one of China’s greatest achievements,” said US Secretary of State Mike Pompeo in a statement. Beijing defended the new law as a “sharp sword hanging over a minority of people” threatening national security after more than a year of anti-government protests in the city.
The UK, which has a special legal and historical responsibility towards Hong Kong as co-signatory to the 1997 Sino-British Joint Declaration on Hong Kong, has opened a pathway to citizenship for up to three million residents of Hong Kong. It also issued a joint statement urging Beijing to reconsider the law on behalf of 27 countries through the United Nations.
“We urge the Chinese and Hong Kong governments to reconsider the imposition of this legislation and to engage Hong Kong’s people, institutions and judiciary to prevent further erosion of the rights and freedoms that the people of Hong Kong have enjoyed for many years,” it said.
The statement was supported by Australia, Austria, Belgium, Belize, Canada, Denmark, Estonia, Finland, France, Iceland, Ireland, Germany, Japan, Latvia, Liechtenstein, Lithuania, Luxembourg, the Marshall Islands, the Netherlands, New Zealand, Norway, Palau, Slovakia, Slovenia, Sweden and Switzerland.