China rolls out guidelines for offshore IPOs

It follows the resolution of a cross-border auditing dispute between China and the US that has reinvigorated the US listing channel. Hesai Technology recently raised USD 190m in the largest offering by a Chinese company since Didi's IPO became engulfed by regulatory imbroglio in mid-2021.

The China Securities Regulatory Commission (CSRC) also recently proposed expanding the registration-based IPO system, which is intended to offer listing candidates lighter-touch regulation and a smoother path to the bourse, to all domestic stock markets. At present, it is limited to the Star Market, ChiNext, and the Beijing Stock Exchange. 

A shift from an approval-based to a registration-based system is part of the new approach to overseas IPOs as well. The new regime is scheduled to come into effect on March 31.

The CSRC will not set additional thresholds or conditions for listing, but candidates must still undergo a security assessment and seek review opinions from the State Council. Moreover, the CSRC has the power to block listings that may impede state security or where companies are subject to corruption investigations.

Significantly, the regulations appear to validate the variable interest entity (VIE) structure by giving the CSRC oversight of it. VIEs - including in corporate structures so that foreign investors can get exposure to restricted sectors in China - have long existed in a regulatory grey area. 

“Offshore listing is a key component of China’s capital markets opening,” the CSRC said in a statement. "The new rules reflect China’s desire to open its capital markets and allow companies to raise capital from international investors who can share in the growth story of the country.”

The regulator noted that companies have previously deliberately bypassed supervision and listed offshore, violating industry rules and endangering national security.

Under the new guidelines, offshore listing candidates must make a filing with the CSRC within three days of submitting their application. Materials will be reviewed within 20 days and conclusions will be published online. International brokerages sponsoring these IPOs must file with the CSRC as well.

Companies that have already listed offshore or expect to complete the IPO process within six months are not subject to a filing requirement.

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