China companies seek London code

04/08/2009 Robert Tyerman

A City group is campaigning to get China companies to subscribe to an equivalent of the ‘Kitemark’ scheme

Moves are afoot to establish an urgently needed new corporate governance code for Chinese and China-focused companies listed in London. Spearheaded by John McLean, chairman of AIM-quoted China Food Company, the campaign will seek to remove what is perceived as a damaging level of mistrust obliging many companies to trade at a discount to their peers and making deals and money raising harder and more expensive.

‘We are still at a formative stage,’ explains McLean, who wants China companies to subscribe to an equivalent of the ‘Kitemark’ scheme, to verify trust, integrity and quality. ‘The companies could adopt it and we could then market it.’

McLean sees removing the ‘China discount’ this way as important for both the companies themselves and the London market, which has attracted numerous China listings. He says he has already recruited ‘a nucleus of companies’ to the cause, after talking to company chiefs, advisers, lawyers and accountants, and hopes the campaign will gather further momentum.

Advisers have certainly blamed the widespread perception of Chinese companies as family-dominated and secretive for a disillusionment that has caused many to delist from the junior AIM market. These include EBT Mobile China and telecoms concern GMO. Some, such as China Growth Opportunities and China Biodiesel, have plunged from their float prices, though others, including China Medical and China Food itself, a supplier of soya sauce, vinegar bean paste and the like, have fared better.

Conscious that many investors fear that China companies do not practice proper governance or management methods, McLean and his supporters want a new regime to show that ‘they are often of a higher standard than many Western companies. We have put together a framework and now we need to define it.’