The NASDAQ Representative Office in Shanghai was established in October 2002, just at the time NASDAQ announced it was pulling out of Japan. The implications of these events are clear.
The establishment of the NASDAQ Shanghai Representative Office is an important link in the company's overseas expansion. When NASDAQ first opened for business in early 1971, it was merely an automated system of quotations. After 30 years' development, its scale approaches that of the 100-year-old New York Stock Exchange, having produced giants such as Microsoft, Intel and Cisco. When the IT bubble burst at the end of the 20th century NASDAQ weathered some unprecedented setbacks, causing it to drop from 5,000 to less than 1,500 points. At the beginning of a new period of adjustment NASDAQ faced a fresh challenge. The American and global recession caused numbers of companies seeking a listing to decrease sharply, and in order to consolidate its existing achievements and regain its past glory NASDAQ began expanding overseas. Its original aim was to create a global e-stock market, and establish a global stock-market union linking New York, London and Tokyo. But owing to huge losses, NASDAQ Japan, established in June 2000, closed down in October 2002. On pulling out of Japan the president of NASDAQ stressed that his company would continue its global strategy by promoting joint-venture projects in Europe. Its assault on the European market is expected to begin in 2003. The establishment of the NASDAQ Shanghai Representative Office, and the cooperation agreement reached with the Hong Kong Security Regulatory Commission clearly indicate the importance of China within NASDAQ's expansion strategy.
There are three reasons why NASDAQ favors China. The main one is that amid a global economy that has been ailing since the start of the 21st century, the Chinese economy has prospered, and maintained a 7 percent annual economic growth for two successive years. According to the latest statistics, in the first three quarters of 2002, China maintained a growth rate of 7.9 percent -- far higher than that of any other country. Owing to the avowed US intention to overthrow Iraqi president Saddam Hussein, and rampant terrorism, the world economy is not likely to recover in the short term. The situation in China, on the other hand, is quite the reverse. China is peaceful and stable, and its successful bid to hold the 2008 Olympic Games means that in the coming five to six years the Chinese economy will sustain a healthy momentum of development. This makes for a perfect environment in which to set up excellent high-tech enterprises. In recent years a large number of high-tech enterprises with great potential for development, eminently suitable for a stock market listing, have emerged in China. This is what makes China so attractive to NASDAQ.
Secondly, Chinese companies that have a NASDAQ listing have performed well. After Chinadotcom Corporation's NASDAQ listing in 1998, several other enterprises, such as Sina, Sohu and Asiainfo.com, followed suit. It has not been easy for these enterprises to hold out amid the collapse of so many other dot.com enterprises, so their improved performance has successfully retained the confidence of investors. This has, in turn, enhanced the general image of Chinese enterprises, and drawn NASDAQ's attention.
Finally, the establishment of a second-board market in China is just around the corner. The one currently operating in Hong Kong -- the Hong Kong Exchange Growth Enterprise Market, attracts an increasing number of enterprises from the interior regions. There are also companies ripe for world stock exchanges listings. NASDAQ has its eye on the cream of these.
At present, NASDAQ's representative office is still at a preparatory stage. In order to expand the overseas listing of Chinese enterprises it has begun to provide consultation services to high-tech enterprises on the Chinese mainland. This encompasses preparatory work for a NASDAQ listing, matters that involve lawyers, accountants and investment banks, and applications to the China Security Regulatory Commission and the US Security and Exchange Commission. To date, several Chinese enterprises have, after consultation at the office, gained a NASDAQ listing. The office also offers free personnel training for the China Security Regulatory Commission and the Shanghai Stock Exchange.
NASDAQ's flexible mechanism and high potential guarantees its success in Shanghai. It also offers to Chinese enterprises the opportunity to realize their goal of an overseas listing, thereby achieving greater development, within a more standard company structure.
(China Today December 21, 2002)
