Lending Association

Chinese Govt talks up economy in the face of tough market conditions

The irony couldn’t have been starker – there was China’s President Xi Jinping sweet talking a group of foreign CEO’s last week and while this was going on two major listings – of parts of Chinese-owned companies, were pulled.

In a series of high-profile events, Chinese officials pledged equal treatment for foreign firms, expressed confidence China will hit its 5% growth target this year and President Xi Jinping held an audience with 15 US business leaders to deliver a message that the theory of “peak China” was just hot air and foreign companies can still invest.

But Chinese-controlled Swiss ag chemical giant, Syngenta Group Co. Ltd. called off what could have been a $US9 billion stock-market listing in Shanghai, according to a notice on the stock exchange’s website. The Chinese-owned seed and pesticide giant blamed the continuing uncertainties in China’s markets but suggested that the IPO could be reborn if market conditions improve.

Earlier last week, Alibaba pulled the $US1 billion float of its logistics arm which was due to happen on the Hong Kong Stock Exchange.

Data from China’s commerce ministry shows an 8% drop in foreign direct investment over 2023. A wider measure from the currency exchange regulator including flows of retained earnings showed a decline of about 80% in 2023 to $US33 billion. It was the steepest drop since records began in 1980.

Both aborted floats underline the fear and suspicion even Chinese-owned companies have about the country’s economic outlook, the health of the stockmarket and increasingly arbitrary regulatory.

Chinese markets are down sharply since their peaks in 2021 (coinciding with the slump in property because 2021 was the peak year for property prices and sales).

An 80% drop in IPO volumes has come amid 30% decline in the CSI 300 index over three years. IPOs totalled $US91 billion in 221 – in 2023 they amounted to $US2.9 billion.

Syngenta ended a three year attempt to get its Shanghai listing done and it is an enormous slap in the face for the country given that Syngenta is owned by state-owned ChemChina.
Western analysts say the company and local advisors struggled to get any reaction from the Shanghai exchange and other regulators – it was as though there was a determined effort to frustrate the IPO, which ended up working.

This decision underscores the ongoing challenges within China’s IPO market, which has seen a dramatic slowdown since last year.
The Swiss seed and pesticide giant’s withdrawal after a three-year attempt highlights the deepening concerns over the viability of China’s stock market for large-scale listings and to the supposed improvements to regulation to make listing and investing easier.