Chinese companies - Return Investment:

Investment return of domestic investors in an economy of its currency held by the transfer of capital or equity to the outside, and then as a direct investment into the economic behavior of the economy. Return investment can be divided into two narrow and broad. Return investment refers only to a narrow cross-border currency and from the movement of capital, investment in a broad sense also includes the return of the shares reverse cross-border mergers and acquisitions led to the transfer.

Return investment generally have the following basic characteristics: Although the return investment process may involve one or several shell companies and complex environment associated with capital transactions, but in fact related to capital or equity is still the ultimate controller of the domestic residents; domestic investors in select Hong Kong or other international tax havens as a registered foreign affiliates, according to Commerce Department reported the number of actual foreign investment ranking, in 2004, Hong Kong, British Virgin Islands, the Cayman Islands and Samoa were ranked first and second , seven, nine, international tax haven status is very significant; in capital outflows is often part there were irregularities, or fail to perform overseas investment management process, or not disclosed in the audit process return investment matters; return investment will lead to " changes in foreign capital, "but the changing nature of business within the main business at the same time does not change.

By the Chinese capital market development limited by objective conditions, domestic enterprises in China or in the domestic listed bank loans obstacles, they tend to get public financing indirectly through the development of offshore funds. Indirectly in the domestic private or public enterprises outside the process, can take the direct injection of capital or financing the acquisition of the convertible in two ways, within its assets owned by shell companies to transfer territory. The so-called direct injection of the convertible, is the shell company to the shareholders of domestic companies into the domestic equity assets in exchange for shares issued by shell companies holding the right direction, also known as a reverse merger. This approach generally taken by the state-owned enterprises.

However, because current regulations do not specifically on the price of the stock is a form of payment, there is understanding between regulatory authorities, and directly involved in convertible foreign investment approval, shareholders of private enterprises tend to be achieved indirectly, by financing the acquisition of listed companies through the introduction of off shore Bridge loans or strategic investors and get the equivalent of net book value of foreign exchange assets, rights and interests of domestic assets and cash. Although the assets of private enterprises within the rights of shareholders are transferred from the legal shell companies controlled by the, but the domestic and foreign for the same management, this approach is still cross-border nature of the convertible. Through this model, domestic private enterprises into holding companies throughout shell company.

Outside the course of cross-border financing of convertible degeneration as a result of foreign investment of domestic enterprises is an important source of investment return. According to CSRC statistics, as of the end of July 2005, in convertible foreign direct way to achieve indirectly through the listing of domestic enterprises (mainly state-owned enterprises) about 80; According to preliminary statistics, the acquisition of outside financing be achieved indirectly through the market domestic enterprises (mainly private enterprises) reached more than 250. The return of cross-border equity investment is converted, does not involve the actual outflow of capital, funds raised overseas as an increment of foreign capital (foreign investment capital increase) or the stock of domestic assets, cash income (including underweight owned overseas stock) into the country.