In the news: Focus Media seeks Shenzhen backdoor listing, groups voice out against draft NGO law and the textile industry faces pollution pressure

Focus Media seeks Shenzhen backdoor listing

Shanghai-based advertising company Focus Media reached a Rmb45.7 billion (US$7.4 billion) deal for a listing on the Shenzhen Stock Exchange last week. The deal values the company at about double the US$3.7 billion it was worth when it was taken private in 2013. Focus and its investors FountainVest Partners, CITIC Capital Partners, CDH Investments and China Everbright are trying to tap into China's surging stock markets. The Shenzhen index that Focus is aiming for has risen by 114% this year. A backdoor listing can offer a more direct path to the market than an IPO, especially in China where hundreds of firms are waiting in line for regulatory approval. Silicone rubber product manufacturer Jiangsu Hongda New Material will acquire control of Focus. There are a number of companies with a track record similar to Focus – Shanda Interactive and Giant Interactive delisted from the US market and were privatised. They, and their private equity backers, will be watching this deal closely to see if the route offers a lucrative way out. If the new shares rise sharply, the investors will have found an easier means of selling their stakes.

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Human rights group says draft NGO law must change

The Observatory for the Protection of Human Rights is the latest organisation to express concern about China's draft law on the management of overseas NGOs, which it says will inevitably shrink the space for Chinese civil society and severely restrict the freedom of association and expression in the country. While foreign NGOs have been unable to register in China for the past 20 years, this draft further restricts the possibility for them to conduct activities in China. It requires them to be approved by a Chinese professional supervisory unit prior to registration and bans those not registered with the State Council's public security departments from funding any Chinese individual or organisation. It also prohibits local groups from conducting activities on behalf of non-registered foreign NGOs. The group has emphasised the worrisome high level of state oversight and control over all NGO activities. Organisations that violate financial or tax regulations are subject to closure, a maximum Rmb50,000 fine and possible administrative detention of staff. The WSJ reported 45 US business and professional groups (ranging from tech to agriculture to entertainment) have signed a letter to the Chinese government urging it to modify the draft, as they say foreign non-profits play an integral part in their daily operations in China. The draft NGO law is part of a trifecta as the government prepares two other laws on national security and anti-terrorism.

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Apparel makers face pollution pressures

China's textile plants, which are among the nation's worst wastewater polluters, are facing intensified pressure to clean up their act. While the government has now made it a criminal act to pollute with punishments ranging from penalties to jail time, environmental groups have taken to naming and shaming factories that don't treat water properly and can now bring lawsuits against them. Companies like Nike are pressing their local suppliers to use less water. But small- to mid-sized dye houses, which dump billions of gallons of toxic discharge into China's waterways every year, may not be able to afford the hundreds of thousands of dollars that even the cheapest treatment systems can cost. Levi Strauss and Crystal Group are working on a water recycling program at a denim factory in Zhongshan, which reuses up to 65% of its water. Esquel Group, manufacturer for Ralph Lauren and Tommy Hilfiger, invested US$7 million on a wastewater converting system in Gaoming. With manufacturing already in contraction for the third month in a row, the last thing that businesses need is to be hobbled by massive fines. The seriousness of China's campaign can be seen in its 2015 Catalogue, which seeks to promote foreign investment in environment-related industries. So companies would do well to get their act together. In any case, a Go Green campaign wouldn't exactly hurt the image of brands such as Levis and Ralph Lauren.

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