Doing Business in China

China to become the king of IPO China Real Estate Files for U.S. IPO.China is positioned to become the king of the IPO market.

The flow of initial public offerings of stock has recovered faster in China in the third quarter than anywhere else in the world.

China accounted for 38% of the total number of global IPOs in the three-month period and 25% of the number so far this year, including A-shares limited to domestic investors and a few international institutions, and B-shares open to all international investors, according to data tracker Dealogic. If the pace continues, China will end up topping every other country, and even entire regions such as Europe and North America, for all of 2009.

China's dominance isn't surprising given the size of the market and the Chinese government's desire to privatize more companies, said Thomas B. Fox Jr., head of global capital markets for the Americas at UBS AG.

"So many areas are still government-held -- natural resources, telecommunications, banks, transportation -- it's hard to imagine a country having an economy the size of China's with virtually none of the companies being public," he said.

 World-wide, 153 IPOs raised $34.66 billion in the three months ended Sept. 30, compared with 158 that raised $9.66 billion in the same period of 2008, according to Dealogic. While traditional new-issuance powerhouses such as Europe and North America showed signs of life in the quarter compared with earlier this year, China had more deals than the two former leaders combined. The amount raised by Chinese-based firms accounted for 68% of the global total.

As other countries were reeling from global economic turmoil, China's economy continued to show growth, albeit at a slower pace than before. There also was a strong pipeline of private companies set to go public in China when markets were ready in the quarter, while new filings in the U.S. had ground to a halt amid the financial crisis, and the backlog of deals dried up.

"People want exposure to the consumer economy in Asia," said Jim Rossman, head of U.S. equity capital markets at Macquarie Capital. "The region is not really distracted by questions of whether they need to reform their financial systems or reform health care. The financial crisis was never as severe, and it's not as constant a topic of conversation as it is in the West."

The Shanghai and Hong Kong stock markets were the main beneficiaries of China's IPO strength. Of the 58 Chinese stock offerings that raised $23.59 billion in the third quarter -- up from the 29 that raised $2.8 billion in the third quarter of 2008 -- only one, Shanda Games Ltd., ended up listing in the U.S.

China Real Estate Information Corp. filed plans with the U.S. Securities and Exchange Commission to sell as much as $200 million of American depositary shares through an initial public offering.

The company is China's largest provider of real-estate information and consulting services based on revenue. It is a unit of E-House (China) Holdings Ltd., a real-estate services company in China.

China Real Estate's earnings for the first half of 2009 were $11 million on revenue of $31.2 million, up from year-earlier earnings of $7.2 million on revenue of $19.3 million. China's real-estate market, after slowing down at the height of the financial crisis, has resuming a strong growth trajectory.

China Real Estate is in the process of acquiring the online real-estate business of Sina Corp. After that deal is completed, the company will begin generating online-advertising revenue. China Real Estate owns 34% of a joint venture with Sina. Sina would own a sizable stake of China Real Estate after the IPO; the amount is to be determined based on the IPO's size.

The company plans to list on the Nasdaq Global Market under the symbol CRIC. Proceeds from the offering would be used in part for capital spending.

Asia has been a hotbed for the recent uptick in U.S. IPO activity. IPO activity in general has picked up the past two months as equity markets continued to rebound.