China's flag carrier Air China has ruled out plans to list shares in New York and may offer them in London instead.

The airline hopes to raise US$500 million in an initial public offering of stock in Hong Kong and another major market, either late this year or early next year.

It had originally planned to be listed in New York but had dropped that plan to target London, sources familiar with the share listing said.

A London listing by Air China would heighten fears that the recent tightening in corporate governance rules in the United States would hurt its capital markets by deterring some companies from holding offerings there, analysts said.

The London Stock Exchange, where only five Chinese mainland companies have been listed, is marketing itself as an easier and cheaper alternative to New York��s main board and NASDAQ, which together have more than 20 mainland firms.

The London side will also open its first Asian office in Hong Kong next week to compete with its U.S. rivals.

Some analysts believed the similarity between the accounting rules in Hong Kong and Britain would make it easier for Air China to prepare its accounts.

The stricter disclosure and financial requirements imposed in the United States were also a negative factor for many Chinese companies, analysts said.

China Netcom, which plans for a US$1.5 billion IPO in Hong Kong and New York, warned earlier this week it needed some time to comply with the Sarbanes-Oxley Act required by U.S. regulators.

The size of the New York capital markets was not a big attraction for Chinese companies as they raised most of their IPO funds from international fund managers and Hong Kong retail investors, analysts said.

Air China has been in discussions with a number of international airlines that are interested in buying a stake before the IPO.

Merrill Lynch and China International Capital Corp. are advisers for Air China��s listing plan.

Source: Shenzhen Daily-Agencies