Hearing on “ China’s Capital Markets Strategies”

Opening Statement of C. Richard D’Amato

Commission Chairman

August 11, 2005
Washington , DC  

I would like to thank Vice Chairman Robinson for continuing to focus the Commission’s attention on the important topic before us, and today’s panelists for offering their informed perspectives on this issue. The economic and security challenges for the United States stemming from the increasing incursion of Chinese firms to the global capital markets is certainly one of the most unique issues in our mandate from Congress.

The vast majority of Chinese enterprises listed on international capital markets are owned and operated by the Chinese state. Questionable corporate governance, accounting practices, and minority shareholder rights make this a subject of particular concern to the Congress. These issues have significant implications for U.S. institutional and portfolio investors looking to purchase stock in Chinese firms, as well as financial analysts tasked with unraveling Chinese companies’ complex web of relationships and finances.

As Chinese financial institutions prepare for an estimated combined $15 billion in listings, questions need to be raised regarding the loan portfolios of these institutions. I am concerned that U.S. investors may not have sufficient information to make informed decisions about the risk of these investments. Furthermore, the possible links between listed state-run firms and banks and China’s military industrial complex has here-to-for lacked comprehensive examination.