Chinese Stocks Flee U.S. Exchanges

More than 60 Chinese companies joined U.S. exchanges from 2008 through 2011, hoping to cash in on the Western appetite for Asian growth stocks. Now some of those companies are pulling up stakes. China Development Bank, the state-owned lender charged with strengthening the country’s competitiveness, is providing more than $1 billion in financing to help companies leave the U.S. stock market.

Many smaller Chinese companies gained listings via so-called reverse mergers—buying a company that was already traded on a U.S. exchange. Investor enthusiasm collapsed after Hong Kong-based short-selling firm Muddy Waters in June 2011 accused Sino-Forest, a timber company that traded on the Toronto exchange, of exaggerating its assets. Sino-Forest filed for bankruptcy in March after denying the allegations. Those allegations raised concerns about accounting and corporate-governance standards at Chinese companies. The 82 companies in the Bloomberg Chinese Reverse mergers index lost 52 percent of their market value from June 2011 through July 16.