China to modify IPO approvals system

An official document released following a meeting of the Communist Party's Central Committee proposed an IPO registration system with a view to establishing a multi-level capital market. The government is also promoting multi-channel equity financing and direct financing for companies.

Under the approval system, listing applicants must meet certain CSRC-set revenue and profit requirements. The approach has been criticized because state-owned enterprises are often allowed to jump the queue.

A registration-based system, which is widely use in developed economies, would allow companies and investors decide the valuation and timing of new share offerings. It requires a high level of information disclosure.

Gang Xiao, chairman of the CSRC, said at a conference in Beijing this week that the regulator aims to promote market-led decisions on company listings. "The regulator will be responsible for ensuring that companies disclose financial information properly, rather than merely evaluating company's listing valuation and profitability," he said.

However, Xiao acknowledged that introducing a registration-based system would take time and effort, noting that the US Securities and Exchange Commission has more than 500 professionals in its stocks issuance team, including accountants, lawyers and industry experts.

"We don't have such strong manpower and high level of professionalism now," Xiao. "To implement a registration system, it requires supplemental regulatory support. For instance, we should amend the Securities Law."

The new registration system will come into use from 2015, China Business News reported, citing an unnamed government official.

• Tweet  
• Facebook  
• LinkedIn  
• Google plus  
• Save this article  
• Send to  

• Topics
• Greater China
• Regulation
• Exits
• China
• CSRC
• regulation
• IPO