Chinese firms whose expansion plans are on ice after government stock market intervention

Tonhe Electronics is a casualty of Beijing’s frantic effort to stop a stock market bust.

The maker of electrical equipment, part of a technology industry the ruling Communist Party wants to promote, hoped to raise 200 million yuan (HK$240 million) from an initial public offering of stock to build a research and development centre.

Then share prices collapsed and Beijing cancelled stock sales by Tonhe and more than two dozen other companies as part of its desperate effort to stem the slide. Now the company in the central city of Shijiazhuang is in limbo.

“We have no other fundraising plans,” said a Tonhe investor relations representative who declined to give her full name. “What we can do now is just wait for the notice to get the IPO started again.”

Beijing’s scramble to put a floor under free-falling share prices came at a cost China has yet to tally. The boom and bust passed so fast it had little impact on consumer spending. But on top of the public money ploughed into buying shares, the intervention disrupted fundraising for small companies and set back efforts to make the stock market a tool for economic reform.

State agencies and companies charged with buying shares to prop up prices has yet to announce what it bought or how much it spent. Goldman Sachs estimated in a report last month that group, dubbed the “National Team” by financial analysts, spent 860 to 900 billion yuan in June and July.