Middle East

China is proposing stricter rules, but there is no ban on offshore IPOs

China’s Securities Watchdog proposed on Friday to tighten rules governing Chinese companies listed abroad.
The proposed rules that investors have been waiting for are posted on the China Securities Regulatory Commission website, extending CSRC’s oversight of offshore listings to variable interest entity (VIE) -structured Chinese companies.
There was a lot of uncertainty between investors and Chinese companies about how strict the new rules would be.
“China is tightening offshore listing screws, but not completely off the valves,” said Andrew Collier, managing director of Orient Capital Research.
The CSRC said the existing rules governing offshore listings are outdated and the new rules proposed reflect China’s desire to open up further and are “not about policy tightening.” Previously, regulators were only investigating companies established onshore in China that offered offshore listings, such as Hong Kong.
Beijing has seen a surge in regulations this year under President Xi Jinping, including curbing anti-competitive behavior, banning private lesson groups, and curbing debt assaults by real estate developers in a wide range of campaigns that have disturbed domestic and global markets. Unleashed. ..
VIE has been used primarily by companies listed on the US offshore stock market to circumvent Chinese rules restricting foreign investment in sensitive industries such as media and telecommunications.
Most offshore-listed Chinese tech companies, including Alibaba Group Holdings and JD.com Inc, have increased flexibility to raise capital while providing the scrutiny and lengthy IPO review process that local companies must experience. Uses a structure to avoid. ..
“The real key is the amount of data we need to hold, the location of the servers, and whether the United States or China is responsible for accounting,” Collier said.
CSRC said the proposed registration process could take up to 20 business days if the appropriate materials were submitted.
In addition, international banks that undertake offshore listings of Chinese companies must register with the CSRC.
Offshore IPOs provide an alternative source of funding for Chinese companies, and listings in New York have been regarded by many as a badge of honor.
However, Beijing has stepped up oversight of its listings since the $ 4.4 billion initial public offering (IPO) of Didi, the ride-haling giant, and Friday’s proposal is as expected by some. It wasn’t strict.
According to Refinitiv data, Chinese companies raised about $ 12.8 billion in US listings in 2021, but trading stopped after Diddy’s debut in New York in early July.
The CSRC added that Chinese regulators respect the company’s choice of listing location and that the rules do not apply retroactively and do not consider whether the company meets the requirements for an overseas listing location.
However, according to the new rules proposed, the Chinese government can order companies to dispose of their assets or businesses if offshore listings endanger national security.
This announcement was made due to the closure of the US market on Friday during the Christmas holidays.
VIE will allow Chinese companies to set up offshore companies for overseas listings and allow foreign investors to buy them.

http://www.gulf-times.com/story/706916/China-proposes-tighter-rules-but-no-ban-for-offsho China is proposing stricter rules, but there is no ban on offshore IPOs

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