Record Year for Chinese IPOs in US

December 8 sees the two Chinese internet firms Dangdang and Youku issue shares on the New York Stock Exchange. The move is set to make 2010 a record year for Chinese IPOs in the United States. CRI's Dominic Swire has the story.

Chinese netizens chat, play games and browse the web in one of Beijing's many internet cafes. The last ten years have seen the number of internet users in China balloon from around 20 million to over 400 million. That's more than the entire population of the United States.

It's this growing potential that investors around the world are looking to tap into, says Bill Buhr an IPO Strategist from Chigago-based investment research firm Morningstar.

"US investors want a way to buy into China as a way to gain some diversity for their own portfolios. And then for the Chinese companies I think it is very attractive for them to list over here because, whether it's perception or reality, the markets are more liquid and the issues can attract more attention."

Two of the Chinese internet companies looking to capitalize on this desire to invest in China are online book retailer Dangdang and web-based video provider Youku.

Both are just two of an expected 24 Chinese companies waiting to list on US stock markets, according to data provider Dealogic. But neither of them has yet proved profitable. This has led some to question whether investing in them is a good idea. Bill Buhr again.

"Essentially they're both just first movers and they lead their industries at this point there's no guarantee that they can sustain that first mover advantage and I think that's why there's been some skepticism about some of these deals."

Investing in high-tech companies that are not yet profitable is reminiscent of the dotcom bubble in the 90s when many promising internet startups ultimately failed to deliver. But not all agree. Professor Zhao Zhongxiu is an expert in international trade at Beijing's University of International Business and Economics. He says this time it's different because the market is more mature and the companies have already developed large customer bases.

"Most of these companies are based on the Chinese future market and provide an alternative for existing distribution channels and more young people are used to shopping and experiencing the internet. So I think today's size of the market is totally different to that of 10 yrs ago."

Of course it's impossible to predict the future performance of Dangdang and Youku once they have issued shares. But their success will depend on whether they can continue to persuade internet users like the ones here to use their services.

For CRI, I'm Dominic Swire.