China is rolling out the welcome mat for technology companies. Foxconn, the world’s largest electronics assembler and a 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.
Companies hoping to list in the mainland equity market 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 (FII) 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 16.2 billion yuan ($2.6 billion), last year. A 23 times earnings multiple – effectively the ceiling for pricing new stock in the mainland market – implies a valuation of $59 billion.
A big, high-tech addition to a mainland bourse would be a victory for the country, whose government is keen to emphasize 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 startups and offshore-listed tech giants including Alibaba and Tencent to list at home, according to media reports.
FII’s Taiwan-based roots help, too. The central government has been stepping up its campaign to attract more capital and talent from across the Straits. Earlier this year, Beijing unveiled rules giving some companies from Taiwan the same treatment and perks, such as tax rebates, that mainland peers enjoy. Local governments are targeting startups from Taiwan too, by offering entrepreneurs free office space, housing subsidies, tax breaks and cash handouts.
FII suggests Beijing’s charm offensive is yielding results.
The article was first published on Reuters Breakingviews.