Aside from these opportunities, there are an increasing number of investment opportunities available to either wealthy individual investors or the smaller, more boutique oriented investment houses and brokerage firms in the United States. These smaller firms often lack the staff, experience, and time developed relationships to locate a variety of investment opportunities available outside of China’s major cities.
Among our services is to make available to interested parties a range of possible investments about which we have been approached based on our prior relationships with companies and individuals in China. They range from a few million dollars to several hundred million dollars as Chinese companies are seeking to expand their factories, modernize them, or to develop new production facilities for new products.
The investment climate in China is considered very hot as the rates of return are often in the high double digits on a per annum basis, with the potential to earn even significantly higher returns when these Chinese companies go forward with public stock offerings. At present, most of the IPO’s are taking place on the Hong Kong market, the London Stock Exchange or on one of several U.S. stock markets. We foresee that within the next five to ten years, there will be a major transformation of the Shanghai and Shenzhen stock markets, and that these markets will be open to foreign investors.
At present, foreign investors can only purchase class “B” shares of stock, while the class “A” shares of stock are restricted to Chinese nationals. The market for the Class B shares are therefore quite limited, and it is limiting the ability of these markets to offer the opportunity for greater capital funding in China. At present, given the heated nature of the China market, this is not a problem, but we foresee that in the next decade, at the outside, the situation with change and the division between these two classes of stock will no longer exist and the stock exchanges in China will be more open to foreign investors and Chinese firms wanting to list their companies and raise capital through IPO’s.