It might be unusual for a single city to be home to more than a few publicly listed companies, but Jinjiang city, East China's Fujian Province, has more than 40.

By July this year, the city had 41 listed companies, more than any other Chinese city, with companies listed in Shanghai, Shenzhen and Hong Kong as well as in foreign markets such as the US.

There were only five listed enterprises in Jinjiang before 2007, but the recent rush to go public has brought both wealth and controversy. 

Succession of listings

Hengan International Group Co, China's largest producer of tissues and sanitary napkins, took the lead with a Hong Kong listing in 1998.

It was six years before another firm from Jinjiang got listed. Fujian Fengzhu Textile Science & Technology Co went public on the Shanghai Stock Exchange in April 2004, with clothes firm Fujian Septwolves Industry Co going public in August the same year. Two more companies from the city floated in 2005 and 2006.

At that time, with only five listed firms in Jinjiang, the local government believed the number was too small, especially when compared to areas of Jiangsu and Zhejiang provinces, which had more developed private sectors.

So the Jinjiang government set a target to catch up with Jiangyin, a city in Jiangsu Province, which took the lead at that time with 19 firms listed both at home and abroad by the end of 2006.

Jinjiang finally overtook Jiangyin in terms of its number of listed firms in 2010, and had more companies queuing up to go public.

Face value 

Companies rely heavily on bank loans for development, but it is hard for private firms to get such loans and they face the risk of running out of funds due to surging land and labor costs, so going public offers a good method of financing for them, Dai Shugeng, a professor of economics at Xiamen University, told the Global Times Wednesday.

Ni Zhongsen, who used to work at Hengan, is now chairman of Quanzhou-based Hengrun Capital, which has helped many Jinjiang firms go public.

He told the Global Times Tuesday that many companies seek a listing in order to get past bottlenecks in their development. In the process of their listing preparations they undergo organizational restructuring and make future plans, which helps with their repositioning, Ni noted. They can also increase brand value through a public listing.

"However, 'face' also plays a big role in the number of listings," Ni said.

Especially in recent years, after some firms boosted their reputations and made more profits through going public, other local firm owners envied their success and also sought listings, Ni said. 

The local government has also encouraged the capital market rush, and financial services firms have been eager to push firms to go public, Lin Xiaochun, a lawyer with Guangdong Shu Jin Law Firm, which has served Jinjiang firms since 2000, told the Global Times Wednesday.

Her firm was one of the first to offer services for Jinjiang companies in planning their listings. Seeing the business opportunity, a large number of brokers, law firms and accounting firms also swarmed into Jinjiang to offer services for firms seeking to go public.

The local government has issued several preferential policies and special funds since 2007 to encourage companies to float.  The subsidies and tax reductions for listed firms over the past years have been worth a total of more than 100 million yuan, Caixin magazine reported on December 17, citing Chen Weijin, secretary-general of Jinjiang Textile Association. 

By the end of 2011, 37 local listed companies had raised about 20 billion yuan by floating, and their total market value had reached 180 billion yuan.

Meanwhile, the government was also well rewarded with surging tax revenues. In 2001, the 37 firms paid 3.6 billion yuan in tax, accounting for 27 percent of the local government's fiscal revenue.

Besides government income, leaders of the local government have got frequent promotions, with the leadership in Jinjiang changing six times in the past 10 years, Caixin reported. 

Problems emerge

Amid the rush to go public, certain problems have emerged, such as firms failing to consider their own development and positioning as well as the economic environment.

Some firms found that going public failed to enhance their reputation and only raised modest funds. Others used the capital they raised for the wrong purposes. Clothes firm Fast Casualwear used the funds it raised to expand production, even though the clothes and shoes industries have been suffering from oversupply in recent years, Caixin reported.

Clothes and shoes makers should move toward high-tech industries, instead of expanding in a sector burdened with oversupply, said Dai from Xiamen University.

"In fact, there are nearly 50 listed firms in Jinjiang, but some made their listings quietly, because they want to hide their dark sides away from the public," Ni said.

More than half of the firms sought listings on overseas markets, partly because "firms look prettier when seen from far away," Ni noted.

Some firms that have struggled to meet their listing requirements used fraudulent practices to complete the process, sometimes with help from agents and even government officials.

An official at China Securities Regulatory Commission was sentenced to 13 years in jail in 2005 for having received bribes from Jinjiang-based Fengzhu Textile to assist with its listing.

Local sports product firms Deerway and Exceed Co were also found to have engaged in fraudulent activities in the process of going public.

Companies like this usually encounter problems in the future, which has the effect of spoiling both their own reputation and that of their hometown peers, Ni said.

Stock exchanges around the world, including in China, are tightening their controls on listed firms, but all parties need to work together for an orderly stock market, Ni said.

"Companies planning listings need to be clear about their positioning, advantages and weak points. Awareness of legal issues is also important for them," he noted.