London is an important source of capital for Chinese businesses. Chinese companies have been very active on the London AIM stock market. Since, 2006, nearly a hundred Chinese companies, have raised a significant amount of capital for business development from London. The AIM market is therefore in a very good position to make a significant contribution towards China's National Government's strategy set out in Articles 16 and 49 of the Thirteenth Five Year Plan, which emphasized direct capital raising, rather than reliance on state-backed bank finance, and in particular, raising capital in the overseas markets, primarily in Hong Kong, London and New York.
However, serious governance problems with Chinese companies listed on AIM and NASDAQ has attracted the wide attention of the media and investors. This has resulted in difficulties for the stock price of other Chinese companies from other parts of China that are quoted in London, and also for new Chinese entrants who wish to raise capital in London. There have been many articles about these companies in the UK media. For example, in May of last year, the Financial Times again reported on the situation in Jinjiang, the city in Fujian Province where the Fujian Companies are located and noted an investor saying, "The Stock Exchange should never have allowed these Chinese companies to list. They tarnish the simple, sensible stocks on AIM that are perfectly good investments." Since that time, there have been more than ten similar articles in the Financial Times alone.
Experience has shown that litigation in China aimed at recovering investors losses is very unlikely to be successful. The only meaningful way of approaching these problems is to engage with the local and provincial governments, present a convincing case based on the specific circumstances that a negotiated settlement is in their interest and, once momentum has been established, negotiate such an agreement directly with the Chinese counterparties. This is the only practical way to recover value for investors and to avoid any lasting influence on future cooperation between Chinese businesses and the London capital markets.