Why have many Chinese firms turned to reverse mergers?

Many Chinese firms have pursued reverse mergers primarily to gain access to the US stock exchange. This method allows them to bypass the lengthy and complex process of an initial public offering (IPO) by merging with an already publicly traded company. As a result, firms can access capital markets and attract investment more quickly, which is often critical for their growth and expansion plans.

The reverse merger strategy is particularly appealing for Chinese companies because it enables them to leverage a US listing, enhancing their visibility and credibility in international markets. This access can be vital for firms looking to raise funds for various operational needs or expansion into new markets. By utilizing a reverse merger, these companies can capitalize on the financial benefits of being publicly traded while navigating the challenges associated with traditional IPOs.

The other options, while they touch on relevant topics, do not capture the primary motivation for many Chinese firms engaging in reverse mergers. Decreasing operational costs, improving international relations, or strengthening the domestic market are not the main reasons driving this specific strategy. Instead, the focus is on the financial and market access benefits that a US stock exchange listing provides.