China Steps Up Overseas IPO Supervision in Specific Sectors

The Chinese government will require that domestic companies in sectors closed to foreign direct investment, such as Internet news and publications, receive clearance from regulators before they can list their shares outside of mainland China.

The National Development and Reform Commission (CNDR) announced the new authorization rules on Monday in a statement that also included a “Negative List of Foreign Investment”Updated annual listing the business sectors in which foreign direct investment is prohibited or restricted.

The new rules now apply that list to companies seeking to go public abroad and are known at a time when China is tightening scrutiny on overseas stock sales.

Chinese companies in sectors prohibited for foreign investment “must obtain authorization from the relevant Chinese regulatory bodies if they wish to sell shares and list on foreign markets”Said the CNDR, closing a regulatory loophole.

What’s more, “foreign investors should not be involved in the operation and management of companies”And their stakes must be limited to 30%, in line with the rules that regulate companies listed on local stock exchanges.

The latest negative list includes prohibited sectors such as compulsory education institutions, news organizations, and rare earth minerals. In addition, foreign investment is restricted in sectors such as publishing, nuclear power plants and telecommunications.

The NDRC’s statement comes days after the Chinese securities regulator published a draft of rules that requires companies wishing to list abroad to submit reports to ensure they comply with Chinese laws and regulations.

“China is studying how to allow companies in sectors closed to foreign investment to be listed abroad under certain conditions, expanding investment channels for foreign investors.”Said the Chinese Ministry of Commerce in a separate statement.