China is rolling out the welcome mat for technology companies — and Taiwan. Foxconn, the world’s largest electronics assembler and key Apple supplier, is set to list a $50 billion-plus subsidiary in Shanghai. The speedy approval shows Beijing is serious about luring tech giants onto mainland exchanges.
Highly unusual
Companies hoping to list in China must brave a tedious and unpredictable application process. For the 400-plus outfits waiting in line for approval, this could take years. So Thursday’s green light, just 36 days after filing, is highly unusual. Shenzhen-based Foxconn Industrial Internet merited special treatment, though. FII is pushing into areas Beijing sees as key to national industrial policies, like robotics, next-generation wireless networks and smart-manufacturing systems. And the three-year old firm is already a giant: it posted a net profit of $2.6 billion last year. A 23 times earnings multiple, effectively the ceiling for pricing new stock in China — implies a valuation of $59 billion.
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For Foxconn boss Terry Gou there are few downsides: the group is already highly dependent on staying in China’s good graces, employing thousands of people on the mainland.
A big, high-tech addition to a mainland bourse would be a victory for China, whose government is keen to emphasise its move into new technologies. So-called old-economy stocks in areas like banking and energy dominate the Shanghai and Shenzhen stock exchanges. Beijing is also pushing local start-ups and offshore-listed web giants including Alibaba and Tencent to list at home, according to media reports.
FII’s Taiwanese roots help, too. The People’s Republic has been stepping up its campaign to attract more capital and talent from across the strait. Earlier this year, Beijing unveiled rules giving some companies from the island the same treatment and perks, such as tax rebates, that mainland peers enjoy. Local governments are targeting start-ups from Taiwan too, by offering entrepreneurs free office space, housing subsidies, tax breaks and cash handouts. Binding the two economies more closely together, and handing goodies to some of the restive younger generation, could help offset the chill in relations between the two governments.
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FII suggests Beijing’s charm offensive is yielding results.
( The author, Robyn Mak, is a Reuters Breakingviews columnist. The opinions are her own ).