The Research On The Red-chip Mode Of Chinese Private Enterprises

Since 1999, the year when Yuxing Computer Corporation, the first Chinese private enterprise listed in Hong Kong with red-chip mode, the process of listing abroad with red-chip mode of Chinese private enterprises has already experienced three progressing stages, which can be concluded as the initial explosive stage, fast development stage and mature stage, and has obtained huge progress in overall quantities, kinds of industries as well as location spread, etc. In contemporary time, relating regulations and credit system have not been built up, and the country lacks multi-layer financial market which provides channels for different enterprise raising money. Meanwhile, there is no exit mechanism by which the international venture funds could exit with high revenue. As a result, red-chip mode becomes a popular choice of Chinese private enterprises when considering listing abroad. However, there are some problems when the mode is employed and the mode itself has brought negative influences for the country's economic safety. It is meaningful to realize these problems and to explore how the mode develops the next step under the regulations.It is hard to find the foreign literatures on red-chip mode, because the overseas researchers mainly focusing on the enterprises'listing abroad. For domestic researchers, the study on this subject was originated from the late 1990s, and mainly targeted at the motivation factors and the influences without a comprehensive system. Comparably, the research on red-chip mode was in scarcity. This paper tries to discuss about the following aspects of red-chip mode, for example, the flow, the motives, the existing problems, the development and the solutions. After a detailed analysis of the aspects, the paper concludes that because of the advantages, red-chip mode would evenually be the necessity when private enterprises make stragetic choices. This paper is composed of 5 chapters.Chapter One: the preface. This part introduces the background and the meaning of the study, and summarizes the relating researches foreign and domestic authors have done on the subject. Chapter Two: the modes of private enterprises cross-border listing. Firstly, this part defines the private enterprise and then expresses the concept and flow of red-chip mode, from traditional and innovative respectively.Chapter Three: the analysis of red-chip mode development. The part firstly reviews the historical development of red-chip mode, concluding the development as three stages: initial explosive stage, fast development stage and mature stage. Secondly, it introduces the quantities and industries of Chinese private enterprises in the main international stock exchanges. Thirdly, the paper analyzes the development.Chapter Four: the problems and solutions of red-chip mode in the micro aspect. Firstly, the paper analyzes several cases with red-chip mode and concludes the existing problems: venture investment, information lack, regulation lack and the corporation management. As a result, the paper suggests the solutions. The first solution is that Chinese private enterprises should emphasize on their own quality and the corporation governance. The second solution is that when choosing the listing location, Chinese private enterprises should consider the characteristics of the stock exchanges, the enterprises own characteristics and the strategy.Chapter Five: the exploration of the red-chip mode. Firstly, this part examines the motives of red-chip mode and the negative influences it has brought. Secondly, the paper shows the true invention of the policies with the importance of the mode. Thirdly, it indicates the following development of red-chip mode from the short-term run and the long-term run. The paper suggests that in the short-term run, the regulation on red-chip mode is still going on and private enterprises would fix their eyes on the domestic market. However, in the long-term run, because of the advantages the mode would evenually be the necessity when the private enterprises make strategic choices. In addition, the mode is still an important approach the venture investment makes use of.The paper for the first time makes a systematic illustration on the historical development of red-chip mode, from the perspective of macroeconomic backgrounds. On this basis, with the relating regulations in China, the paper explores the future and the solutions from the short-term run and the long-term run respectively.