Securities and Regulatory Commission issues draft rules on filings by firms seeking offshore listing
Bankers and analysts said China’s plan to tighten scrutiny over overseas share sales of mainland companies is likely to ease regulatory uncertainty, which hit financial markets this year and halted offshore listings.
But the securities regulator’s new filing-based system, designed to rein in once freewheeling Chinese listings in the US market and elsewhere, leaves open questions about rule enforcement and compliance criteria, he said.
“The new rules represent a comprehensive, systemic and market-oriented regulatory upgrade,” investment bank China International Capital Corp (CICC) said in a note, but added that they contain “some items that require further observation and clarification.” Is”.
The China Securities and Regulatory Commission published draft rules late Friday requiring filings by companies seeking offshore listings under a framework to ensure they comply with Chinese laws and regulations. Huh.
Companies using the so-called convertible interest unit (VIE) structure will still be allowed to seek offshore listings as long as they comply, removing the uncertainty for investors who have been asked to block such listings from China. was afraid to do.
The risk became bigger after the US listing of Didi Global Inc in July, prompting a major backlash from Chinese officials who were concerned about national security.
The VIE structure has been used by most foreign-listed Chinese tech companies, such as Alibaba and JD.com, to ease Chinese restrictions on foreign investment in certain areas.
Uncertainty over the future of VIE structures, along with China’s regulatory action in key sectors such as e-commerce and tutoring, has crushed shares in offshore-listed Chinese companies this year.
And while Chinese firms raised $12.8 billion in the US this year, the value of deals stalled after Didi’s July listing. In Hong Kong, the value of IPOs fell from $32.1 billion in 2020 to $26.7 billion in 2021, according to data from Refinitiv.
regulatory coordination
Reaction to the new rules will be seen on Monday when the US stock market resumes trading after closing for the Christmas holiday on Friday. Hong Kong shares will resume trading from Tuesday.
The filing-based system is also expected to reduce uncertainty by calling for closer coordination between the securities regulator and industry regulators, such as cybersecurity watchdogs.
“The release of the draft rules shows that major communication barriers between various regulatory bodies have been removed,” said Ming Jin, managing partner at Chinese investment bank Cygnus Equity.
,