Interest in China's stock exchange listings is coming from some unlikely locations. In October last year, a delegation of the best financial and legal brains in Manchester flew to Shanghai to tell a room of Chinese executives how to become a UK-listed company. Some of the Chinese executives who listened in the Pudong hotel conference room headed large operations. Some had 200 staff and bright product ideas. But all sought cash. Over tea and abalone, the high-powered financial advisers and executives from England's northwest told them how they could get it, by a British stock listing.

Manchester, however, doesn't have an exchange - it's best known in soccer-mad China for its football team. But almost half of the companies that gained a listing on London's Alternative Investment Market (AIM) last year came via advisers in the Manchester area. Once the smoky site of the Industrial Revolution, Manchester is now hoping that China, today's workshop of the world, will send it the kind of business it wants to sustain a new financial services economy which has replaced its factories. The potential investors awaiting them on the AIM, part of the London Stock Exchange, were explained, with the costs and regulatory minutiae of a listing. Manchester city region wants to build a services industry worth ¡ê47 billion (?70 billion) a year. So the city's rainmaking Inward Investment Agency for Greater Manchester (MIDAS) is fanning out across the globe, bringing the likes of Google, Bank of New York and now China's cash-hungry private sector, to the city's refitted industrial red-bricks.

The effort to which a secondary British city like Manchester has gone is indicative of how keenly the world's stock exchanges are hunting Chinese listings. Stock exchanges worldwide are opening representative offices around China to fish in a pool of IPO-ready Chinese firms estimated variously to be between 100,000 and 200,000 strong. Relatively late to drop anchor, Europe's pan-national index, Euronext has set up a special taskforce to attract Chinese firms to list on its main board, Eurolist (which combines the markets of Amsterdam, Brussels, Lisbon and Paris), and onto the Alternext board for medium-sized and small firms. "We view China as a key market," Erik Wenngren, director of international listings at Paris-headquartered Euronext, told reporters on a recent trip to Beijing.

Chinese firms should choose Euronext, explained Wenngren, as the best way to tap the "vast pools" of investment capital of the European Union, the world's largest economic bloc in earnings from trade. True, the EU has 457 million consumers and economic clout. Euronext led the Euro zone in stock market listings in 2006 with a total amount of ?21.4 billion offered by the 142 newcomers. A quarter of the 1,300 companies listed on Euronext by the end of 2006 were from outside Europe, including Chinese. But while the total market capitalisation of the 1,210 companies listed on Euronext markets was up 22 percent on 2005, reaching a record ?2.812 trillion, of the 57 new listings on Alternext only two were of foreign companies.

A crowded field

Euronext, which plans to merge with the New York Stock Exchange later this year, has formidable competition for Chinese listings. As China's huge IPOs reshape the world's financial markets and stock exchange rankings, every major stock exchange is building its presence on the mainland. The Hong Kong Stock Exchange (HKSE) topped capital markets worldwide in 2006 on the back of proceeds from mainland IPOs. A whopping HK$325.4 billion (?31.6 billion was raised in the SAR last year, compared to HK$165 billion in 2005. That put the HKSE main board number one in the world, with 15.5 percent of the total capital raised worldwide. In second place with15.0 percent was the London Stock Exchange (LSE), followed in third place by the New York Stock Exchange (NYSE) with 10.5 percent.

Yet Hong Kong's strength is so far mostly in big deals. In 2005 and 2006 surges in capital raised were driven by the biggest IPO ever, the listing of ICBC in Hong Kong and Shanghai. That offering raised almost US$22 billion alone. Yet sometimes quantity can matter over quality. The AIM was seventh in the world rankings with 3.4 percent of the total capital raised worldwide, but it ranked number one in number of IPOs, proof that it has become one of the major capital markets in the world and the choice of ambitious SMEs since its inception in 1995. "Investors have been keen to back non-UK companies because they have often been seen to have faster growth prospects," says Bill Wong, general manager of Wealth Index Capital Group, a Beijing-based consultancy that helped 20 Chinese firms list in the UK and the US. "Chinese firms are likely to be offered a particularly warm reception given the fast expansion of the economy."

Chinese companies listed on the AIM run the gamut of business sectors, though particularly prevalent are firms involved in mining, real estate, software and media. The wealthiest Chinese firm (in terms of market capitalisation) on the AIM, "speciality chemicals" firm Renesola, which listed in August, boasts a market cap of ¡ê25 million. West China Cement, a building materials firm which listed in December, has a market cap of ¡ê76 million while Prince Catering and Management, an operator of restaurants and bars, had a market cap of ¡ê6.12 by December 2006, according to AIM documents.

Only nine small Chinese companies managed to stay afloat on Hong Kong's second board, the Growth Enterprise Market (GEM), in 2005. The number shrunk from 2003, when 27 were listed. And while China pushed the Asia-Pacific region into overall second place with 33 percent of the total capital raised worldwide in 2006, Europe, the Middle East and Africa led the field, accounting for 42 percent of the total worldwide figure (North America raised 20 percent).

Cash still needed

Yet as long as China's get-ahead companies remain cash-strapped, there's plenty of business to go around. As China's macroeconomic cooling measures make it a lot harder for business to get bank loans, the cream of China's firms (OECD investigations show private firms account for 60 percent of China's GDP) lack cash to expand. "Obtaining capital is comparatively difficult for private companies here. ¡­ Domestic capital resources are insufficient," explains Bill Wong. "Insufficient financial support and inadequate financing methods are stunting growth potential," says Wong. "The biggest issue now facing entrepreneurs who have long-term development strategies is how to legally and effectively obtain capital from overseas."

SMEs are no longer fenced in by national or regional boundaries or loyalties. "The capital markets continued to globalise in 2006," said Conway Lee, general manager of China business development at Ernst & Young. "We've seen an increase in cross-border listings and stronger competition between exchanges. That creates more options than ever for both investors and companies looking to go public."

China's own domestic exchanges are also getting better. Shanghai will overtake Hong Kong in 2007, predicted Ernst & Young in a January report on IPO activity in China. "'A and H' is the trend," says Raymond Ng, a partner at Ernst & Young's Beijing office, referring to the respective nicknames of mainland- and Hong Kong-based Chinese stocks. "In 2006 14 IPOs in Shanghai raised RMB146 billion (?14.4 billion) among which 46 percent came from IPOs with the concurrent issuance of both A-shares and H-shares. Another 34 percent came from the issue of A-shares by companies with listed H-shares."

Hong Kong will continue to be the preferred stock exchange of Chinese companies going into 2007. "It will keep the momentum," predicts Ng, who forecasts IPO listings to raise HK$280 billion (?27.3 billion) by the end of the year. Issues of A-shares by companies with listed H-shares will propel Shanghai ahead of Hong Kong by a narrow margin in 2007 with total IPO proceeds forecast to reach RMB280 billion."

Companies entering international capital markets are being seen more favourably on the mainland. "The earlier enterprises do it, the more optimal the benefit will be to them," says Wong, who blames cumbersome regulation for the fact that most international capital is not being exploited quickly enough. The situation does not look like it will be changing any time soon, he says. "China's long-term economic growth cannot be separated from the financial support received from both international and domestic capital."

Manchester, meanwhile, is throwing out all it has to woo China. To show off the city's infrastructure and software, 20 delegates flew to Wuhan, which has been a sister city of Manchester's for two decades. The delegates oiled business links and showed off jerseys bearing the name of Dong Fangzhuo, the young Chinese striker signed by Manchester United. Chinese investors are getting the message, says Colin Sinclair, chief executive at MIDAS, "We have found there is a real interest in UK investment opportunities, particularly amongst the larger organisations."