China’s embrace of Foxconn unit’s US$4.3 billion IPO has a tinge of desperation to it. Here’s why

Just look at that list of investors in Foxconn Industrial Internet’s IPO.

Forget BAT. It was obvious that Baidu, Alibaba Group Holding and Tencent Holdings would take minor stakes in the Foxconn Technology Group affiliate’s blockbuster Shanghai listing. Those three are in the bottom tier of cornerstone buyers anyway.

Leading the line-up is the Shanghai State Development & Investment, which is subscribing for 73 million shares, or 3.7 per cent of those expected to be sold. Central Huijin Investment, China Railway Investment, China Structural Reform Fund and China Life Insurance round out the top five.

Note the pattern: All are state-owned enterprises. In fact, the list of 20 strategic placements is dominated by state-affiliated investors. The top 14 have shorter lock-up periods – half of the shares can be sold after 12 months, half at 18 months. Those lower on the totem pole, like Shanghai Oriental Pearl Group and the BAT collective, are stuck for 36 months.

I don’t imagine Foxconn boss Terry Gou had a lot of choice in the allocation, but he’s a savvy political operator and would probably have come up with a similar list himself.

This isn’t so much a case of companies being called in for national service – Taipei-based Foxconn and its FII listing would have done just fine without state help – as ensuring Chinese flag bearers join the spoils, and maybe even learn a thing or two about the business of technology.

Foxconn is pitching FII as a leading-edge company at the forefront of future trends. In reality, it’s a more mundane manufacturer whose bread and butter is making metal iPhone casings and internal frames, while industrial robots barely show up in its revenue data.