China Overseas Holdings, for example, opened shop in 1979 and is now one of the largest construction companies in Hong Kong and the fifth biggest Red Chip in terms of market capitalization. It is controlled by China's Ministry of Construction. Proof is all over the financial pages. When Guangdong Tannery, a hide and skin processor, offered 30 million shares last December, it was oversubscribed 667 times. The banks are cracking open their coffers too.
Investors believe they are buying assets in a Chinese economy that is growing at double-digit rates.
Yet according to analyst de Trenck, investors are willing to pay a premium. China Resources' Ning concedes that mainland bosses enjoy borrowing money in Hong Kong but have trouble with the idea of repayment. Hong Kong's experience with H-shares, meanwhile, has been even less encouraging. In 1993, Tsingtao Brewery raised money on Hong Kong's exchange to expand beer-making capacity. Two years later, the company admitted it lent most of the funds to Chinese companies instead.