China’s stock rescue leaves IPOs hanging

BEIJING – Tonhe Electronics is a casualty of Beijing’s frantic effort to stop a stock market bust.

The maker of electrical equipment hoped to raise $32 million from an initial public offering of stock to build a research and development center.

Then share prices collapsed and Beijing canceled stock sales by Tonhe and more than two dozen other companies as part of its desperate effort to stem the slide. Now the company in the central city of Shijiazhuang is in limbo.

“We have no other fundraising plans,” said a Tonhe investor relations representative. “What we can do now is just wait for the notice to get the IPO started again.”

Beijing’s scramble to put a floor under free-falling share prices came at a cost China has yet to tally. The boom and bust passed so fast it had little impact on consumer spending. But on top of the public money plowed into buying shares, the intervention set back efforts to make the stock market a tool for economic reform.

State agencies and companies charged with buying shares to prop up prices have yet to announce what it bought or how much it spent. In a report last month, Goldman Sachs estimated that group, dubbed the “National Team” by financial analysts, spent $135-$140 billion in June and July.

That led to state-owned companies amassing a mountain of shares in other government enterprises, many bought from private investors. That reversed a campaign to encourage the public to buy shares in hopes “diverse ownership” of state companies will prod them to become competitive.

The collapse that saw China’s main stock index plunge 30 percent after hitting a peak June 12 prompted ruling party leaders to set aside repeated pledges to give market forces a bigger role in the economy.

Regulators canceled IPOs planned by 28 private companies in electronics, food processing and other industries.

The industries play a role in the ruling party’s plans to transform China from a low-wage factory into a creator of technology and consumer brands with high-paying jobs and environmentally friendly growth.

Regulators have begun allowing companies that already are traded to raise money through sales of additional shares but there has been no word on when IPOs might resume.