The bumpy road to the international A-share trading board

Designed to allow overseas companies to list shares on China's major stock exchange, Shanghai's highly anticipated international trading board is being heralded as a way to provide a powerful lift to the country's equity markets in the year of the tiger, but it is turning into a paper tiger, experts say.

The planned board, which has been under discussion for years without tangible progress, was brought into the spotlight again last summer after government officials revealed the Chinese authorities' determination to launch it. However, key issues such as share sale limits, the use of funds raised through share sales, accounting standards, and listing requirements remain unresolved.

Companies aiming for the international board first need to comply with Chinese accounting standards. However, it is very unrealistic to require companies with assets all over the world to comply with Chinese book-keeping rules and auditing standards, industry experts say.

Every year, the translation of an audit report based on general international standards into the Chinese accounting format could cost a typical company from $5 million to more than $10 million extra -- an expense that all cost-conscious financial executives would want to avoid, experts say.

Another issue is that the nation's corporate and securities laws currently only apply to domestic companies, and Chinese lawmakers are not ready to restructure the legal framework and make it more adaptable for foreign companies that want to offer A-shares.

The preparation of HSBC's highly anticipated Shanghai share sale is suspended for "at least six months", sources familiar with the deal said last week, citing technical problems in the listing process.

Also, with China running a top-down, command-and-control economy, the current review and approval procedure for the country's equity capital market is an obstacle for foreign companies, strategists argue.