Since the early part of the 1990s, more than 60 companies based in the People's Republic of China ("PRC companies") have listed their shares in the U.S. As the continued strong expansion of the Chinese economy will require more capital from outside of China, it is expected that more PRC companies will seek to list their shares in the U.S.

Recently, however, there has been a shift away from the U.S. stock market for certain PRC companies in favor of Hong Kong and London. Other issuers are exploring listing in other European countries or in Japan. Part of the reason for such shift is the concern of the PRC companies about the high cost in connection with compliance with U.S. securities regulations, including the requirement that financial statements be reconciled with U.S. generally accepted accounting principles (“U.S. GAAP”) and the requirement for internal control procedures under Section 404 of the Sarbanes-Oxley Act.

While Section 404 relief in the near future is unlikely, the U.S. Securities Exchange Commission (“SEC”) recently took a positive step to ease accounting obligations for foreign issuers. On June 20, 2007, the five commissioners unanimously voted to remove an existing requirement that non- U.S. companies with shares listed in the U.S. who have been using the International Financial Reporting Standard ("IFRS") to reconcile their financial statements with U.S. GAAP. This proposed change will not be effective immediately, however. The SEC will seek public comments on the proposed rule for a period of 75 days, after which the SEC members will take a second vote before the new rule is effective. The detailed rule proposal is expected to be published this summer.

If the new rule is adopted and effective, all PRC companies that have their shares listed or registered in the U.S. will have the option to select either U.S. GAAP or IFRS for their financial reports starting in 2009 for the accounting year 2008.

Compared with U.S. GAAP which tends to rely on fixed rules, the IFRS is more principle-based, and therefore more flexible. The proposed new rule, however, requires foreign issuers to use the English language version of the IFRS, which is said to have been included in order to reduce risk for U.S. investors.