Marcum Asia To Expand In Hong Kong As U.S.China Tech War Shifts IPOs

A decade ago, Chinese tech companies looking to expand their global reach often chose to set foot in the United States, where old industry icons like Google and Microsoft traded. Listed Chinese internet companies include Alibaba, Baidu and JD.com.

The United States continued its ambitious business in China with the opening in 2019 of the so-called Shanghai Star Stock Exchange, which is linked to the Shanghai Stock Exchange and is referred to by some as China's Nasdaq. Last year, IPOs raised about $34 billion, more than 50% more than the Nasdaq and New York stock exchanges combined. The most prominent STAR lists to date include Semiconductor Manufacturing International, better known as SMIC, and Hua Hong Semiconductor, two of China's top chip manufacturers.

However, highly strained political relations between Washington and Beijing mean more Chinese companies closer to home remain on the list, due in part to Beijing's concerns about data and foreign access to data-sensitive technology. He, in turn, leads the Asian office of an international accounting firm in New York, which plans to expand its operations in Hong Kong.

Marcum Asia CPAs LLP, a joint venture between Marcum LLP and Bernstein & Pinchuk, plans to hire up to 25 employees by the end of 2023, company co-chairman Drew Bernstein said in an interview on Tuesday.

The group will join "several" employees currently employed by Marcum LLP, which merged with Friedman LLP last year and whose Asian operations are now managed by Marcum Asia. The combination of Marcum LLP (#15 in Accounting Today) and Friedman (#33) created one of the top 12 accounting firms with nearly $1 billion in annual revenue.

Bernstein saw a lot in China. Two decades ago, he began auditing companies and, as an accountant, followed the ups and downs of the country's rise to become the world's second-largest economy. Marcum Asia employs over 270 people in Asia and supports issuers in their listings, from direct IPOs to SPACs. He said the growing overlap between stock market listings and national security concerns is changing the investment landscape and making fundraising more difficult.

“If you think about the dominant companies in China today — internet companies, solar energy companies, electric car companies — they just went public on the Nasdaq or the New York Stock Exchange,” he said. Amber said.

“But Chinese IPOs now fall into two categories: security-related and non-security-related, especially when it comes to technology or anything the Chinese authorities consider strategic,” such as semiconductor drivers, artificial intelligence, or quantum computing technology. "The whole thing would be banned" from listing in the United States, he said.

© Contributed by Forbes Marcum Asia Co-Chair Drew Bernstein Marcum Asia

Bernstein expects Chinese regulators to be especially wary of listing AI companies overseas. “Ultimately, I think there will be a Chinese version of AI and a Western version of AI. They will have different capabilities, maybe a different regulatory framework, maybe different security protocols.”

He said companies in the sensitive technology space wishing to go public must choose whether to list Class A shares or Hong Kong shares. - You have nowhere to go.

Bernstein said that Hong Kong is attractive to mainland Chinese companies depending on "the size of the deal and the origin of (potential) investors." “Hong Kong tends to have more diversified capital markets because they operate with open currencies,” he said.

The expansion in Hong Kong will support Marcum Asia in its ongoing expansion efforts in Asia following the opening of an office in Singapore last year. “It is very difficult for us to hire qualified people in Asia, not only in China. It is difficult to find a qualified US certified public accountant in Thailand, Singapore or Malaysia. Hong Kong is one of the places where you work to "find this guy". We want to tap into the talent pool in Hong Kong,” Bernstein said.

He said the number one question international investors are asking about China today is whether the country is "uninvestable" or "inevitable."

“My response to that is, of course, inevitable,” Bernstein said. The country dominates the markets for solar panels, electric vehicle batteries, and electric vehicles and will become the world's second-largest car exporter this year.

Whether or not you choose to invest in Chinese equities is likely to have a significant impact on the performance of these sectors. I have seen many cycles of people falling in love with China, falling in love with China, and falling in love again,” Bernstein said.

"It's like a pendulum. And it will swing again. There are big social problems in China at the moment - unemployment is probably the biggest. And yet China now produces some of the most educated people in the world. Youth unemployment is stuck." China's sector has created some of the most innovative sectors and created about 90% of jobs, attracting foreign capital is crucial for them,” he explained.

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