Leadership Deficiency.
The Chinese economy is out growing its leadership pool. In fact, some industry segments are growing by as much as 30% per year, according to a report by Heidrick & Struggles, a global executive search firm, and by the Stanford Project on Regions of Innovation and Entrepreneurship (SPRIE)(4). Unfortunately, key leadership qualities, such as effective delegation, customer orientation, and corporate structuring are necessary to accomplish business goals, but they are lacking among China’s corporate workforce. This dilemma is the result of conventions within the culture that produce a society of people predisposed toward succession and not toward leadership. Consequently, the result is a workforce with the high turnover rate among executives and a nation deeply in need of skilled leadership.

Capital and Liquidity.
In recent years, Chinese corporations have grown more pro-active in seeking investments and liquidity in the U.S. capital markets. Correspondingly, with almost 20 million registered businesses and a rapidly growing economy, China represents a significant growth opportunity for U.S. and international investors. The bridging of China's businesses with the world's most advanced capital markets is a reflection of the risks and rewards of today's global economy.  However, to achieve the maximum financial benefit from the convergence of the two economic entities, knowledge of both market infrastructures is essential.

Market Access.
China is a social market economy that has grown quickly over the past decade. The majority of the estimated 1,500 companies on both of China's stock exchanges are State Owned Enterprises (SOEs)(5). However, the growth in this economy has largely come about from small enterprises, in particular, township and village enterprises, which are micro, small, or medium in size(6). They are primarily owned by local communities and are controlled, in part, by local government.  In fact, 65% of the Chinese economy is driven by SOE’s, commonly referred to on Wall Street as the "middle market."

Private ownership of businesses and assets is not only legal in China but is also protected and strongly encouraged by the Chinese government. This is due to the fact that the majority of the jobs in China are provided by the thriving private sector of businesses. However, despite the governmental encouragement, Chinese domestic listings are virtually impossible for middle market companies. This is, in part, due to an approximately three-year waiting period, resulting from the thousands of listing candidates waiting in the pipeline. As a result of the sheer volume of interested business candidates, and the time lag in listing private companies on the Mainland, global markets in Hong Kong, the U.S. and the U.K. have become viable alternatives for Chinese businesses. In the recent past, private sector Chinese companies such as Focus Media, Inc. and Shenda Entertainment, Inc. have realized enormous successes by listing in the U.S., an economy built on the principle of a free market and the free flow of capital.  The potential for success in the U.S. market for Chinese businesses is, however, dangerously counterbalanced by the possibility of failure. Without surrogate representation and experienced management, listed companies may end up without sponsorship, trading with limited liquidity, and with valuations below expectations.