China Shipbuilding Industry Company, the Shanghai-listed firm preparing a 17.4 billion yuan (HK$20.5 billion) private placement, warns shareholders it is exempt from disclosing information about its military production.

CSIC aims to use the proceeds of its placement to acquire four civilian shipbuilding firms from its state-owned parent China Shipbuilding Industry Corporation, the mainland's biggest builder of submarines and destroyers. It is the Chinese navy's main supplier of warship equipment, and thus is exempt from disclosing its military production and technology. This exemption might affect investors' assessment of the firm's operations and profitability, the placement prospectus said.

Listed defence contractors such as Lockheed of the US do not reveal their military contracts, so it is normal for CSIC not to do so, said corporate governance activist David Webb. But the non-disclosure of military information was a concern for shareholders because it was a connected transaction of which shareholders want to understand the details, said Webb. In contrast, the US government owns no shares in Lockheed and hence had no connected transaction with the firm, Webb said.