Following China’s economic reforms in the 1980s, Mainland enterprises sought to access foreign capital through equity and bond issuance. Despite robust domestic growth, many firms pursued offshore listings to tap into foreign currency pools, notably the US dollar. This trend has intensified in recent years, influenced by new regulations, US-China tensions, and reforms within Hong Kong’s stock exchange.
More than 300 Mainland companies have listed overseas since 2020, raising substantial capital. The significance of Hong Kong Exchanges and Clearing Limited (HKEX) has grown as it has become a leading venue for such listings, particularly with the introduction of reforms that enhance its attractiveness. For example, in the first half of 2025, HKEX facilitated significant IPOs, including that of Contemporary Amperex Technology Co. Ltd. (CATL), which raised $5.2 billion. This marked a robust 723% year-on-year increase in IPO proceeds, highlighting the strong market momentum.
However, the emergence of HKEX as a key player in global capital markets comes with challenges. The ongoing US-China dynamic has shifted the landscape, imposing tougher regulations on Chinese firms looking to list in the US, leading to a notable decline in such listings. This situation has led to a structural realignment, with many companies choosing HKEX over US exchanges due to regulatory stability and investment alignment.
While the growth of HKEX presents new opportunities for investors seeking exposure to Chinese companies, it also raises concerns about market concentration. A significant majority of HKEX’s market cap is from Mainland firms, increasing vulnerability to economic fluctuations and regulatory changes in China.
Why this story matters:
- It illustrates the evolving landscape of global capital markets in response to geopolitical tensions.
Key takeaway:
- HKEX is becoming the preferred destination for Chinese companies looking to access international funding amid regulatory challenges in the US.
Opposing viewpoint:
- The aggressive pricing of many IPOs raises concerns about their sustainability and the potential risks associated with Hong Kong’s reliance on Mainland firms.
