China’s securities regulator has proposed tightening the rules governing the listing of Chinese companies abroad, something that it said will improve supervision and enable companies to continue to do so.
The China Securities Regulatory Commission (CSRC) said on its website that it proposes to establish a new framework for the listing of Chinese companies abroad.
Overseas initial public offerings (IPOs) have been an alternative source of capital for Chinese companies in the past, and the New York listing has been seen as a badge of honor for many.
Beijing has been studying the possibility of increasing oversight of overseas IPOs since the $ 4.4 billion IPO of ride-sharing giant Didi Global Inc., and Friday’s proposals were not as strict as some expected.
Chinese companies have raised about $ 12.8 billion in U.S. IPOs in 2021, according to Refinitiv data, but operations came to a halt after Didi’s debut in New York in early July.
Under the draft rules, Chinese companies with so-called variable interest entity (VIE) structures can be listed abroad, provided they meet the compliance requirements.
Chinese companies listed on foreign stock markets, mainly in the United States, mostly use VIEs to circumvent Chinese regulations that restrict overseas investment in sensitive sectors such as the media and telecommunications.
This pathway offers companies more flexibility to raise capital abroad, while avoiding the scrutiny and lengthy IPO vetting process that locally incorporated companies have to go through.
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