SCMP: China’s regulator unblocks path to overseas IPOs to help companies raise global capital

(JW Insights) Feb 21 -- China’s regulators have unblocked the path for the country’s companies to list overseas, reopening the avenue of fundraising after a 20-month obstruction to enable businesses to recapitalise for growth in the post-Covid period, reported SCMP on February 17.

With effect from March 31, the China Securities Regulatory Commission (CSRC) will have the mandate to vet applications for offshore listings, including in Hong Kong and the United States, according to a statement released on February 17.

Listing applicants must abide by the rules of industry regulators such as the Cyberspace Administration of China (CAC) in their disclosures of customers’ data and anything that could be construed as state secret. The CSRC will block listings that may impede state security, or those that involve companies or shareholders that have committed corruption, bribes or are under investigation.

The rules would end the mostly unregulated process of Chinese companies’ offshore listings by enacting clear rules, with an overseer.

Chinese offshore listings trickled to a halt after the ride-hailing service Didi defied regulators’ warnings to raise $4.4 billion in New York in July 2021. The move, described by incensed Chinese officials as a “deliberate act of deceit”, kicked off a regulatory crackdown on the Beijing company, ultimately forcing it to delist 11 months later from New York. Didi is now aiming to sell shares in Hong Kong.

Chinese companies raised nearly $230 million in US listings last year, less than 2 per cent of the $12.85 billion raised in 2021, according to Refinitiv data.

The loss of Chinese companies has hit the US exchanges hard, driving out Nasdaq and the New York Stock Exchange (NYSE) from the world’s top 10 IPO markets last year, according Refinitiv’s data.

“The new rule will clear up any uncertainties about how mainland companies with sensitive information can list in the US and Hong Kong,” said Tom Chan Pak-lam, the permanent ­honourable president of the Institute of Securities Dealers in Hong Kong, an industry body. “This is a positive move as it will encourage more new listings in Hong Kong and the US.”

To underscore the point, the CSRC and Hong Kong’s Securities and Futures Commission (SFC) signed an accord on February 17 to lay down the procedures for listings in the city. The agreement clarifies how the two regulators work together to conduct cross-boundary enforcement, supervision of intermediaries and exchange of information, said SCMP.

Four companies including the Lidar maker Hesai(禾赛科技), the online learning platform QuantaSing Group(量子之歌) and the blank-cheque asset buyer Distoken Acquisition Corp have raised a combined US$306 million in New York this year, according to SCMP.