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China private firms shun U.S. as investment, IPO destination, survey shows


SHANGHAI (Reuters) - Chinese private firms are shunning the United States in their overseas expansion, and generally prefer a home listing to a U.S. initial public offering (IPO), a private survey showed on Tuesday, highlighting the trade war's impact on executive decision-making.

The survey is released at a time when U.S. politicians are calling for tighter scrutiny over Chinese investment and capital-raising, while Beijing is encouraging domestic listings by Chinese companies.

Last week, the U.S.-China Economic and Security Review Commission (USCC) proposed measures restricting U.S. capital flows toward Chinese companies.

Despite the trade tensions, Chinese CEOs remain committed to global expansion, but have shifted their focus from the U.S. to Southeast Asia, Europe and Africa, according to a survey conducted jointly by China's prestigious Tsinghua University and Marcum Bernstein and Pinchuk LLP (MarcumBP), a leading auditor for U.S.-listed Chinese companies.

The survey of more than 1,200 business leaders across China also found that 66% of the respondents see China as the most attractive listing venue, compared with just 18.7% who favor the U.S. market. Hong Kong, even with the city's violent protests, is also ahead of the U.S as a preferred IPO destination.

"Most executives looking forward are veering away from the United States," said Drew Bernstein, co-managing partner of MarcumBP.

But he predicted that U.S. investors' interest in fast-growing Chinese tech Unicorns won't diminish, and many Chinese companies still need access to the deep and liquid U.S. capital markets for funding."

"We're not political people. We're just business people," said Bernstein, who also provides advisory services to Chinese companies. "The truth is that there's not a lot of space in business for politics."

According to the survey, fielded at the start of the third quarter, 71% of the Chinese CEOs said they're "very willing to consider mergers and acquisitions" as part of their growth strategy, with acquiring advanced technology being the most important factor in such activities.

USCC, in its 2019 report to Congress last week, said that sustained Chinese investment in cutting-edge sectors in the U.S. raises concern for U.S. policymakers.

USCC recommends that Congress enact legislation to preclude Chinese companies from issuing securities on U.S. stock exchanges if their disclosure is inadequate and doesn't conform to U.S. rules.

"I think there are going to be steps taken to try to improve and ensure the reliability of financial statements of these companies," Bernstein said, adding, though, that the move was not necessarily politically-driven.

(Reporting by Samuel Shen and John Ruwitch; Editing by Alex Richardson)

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