China has announced new rules for overseas IPOs that may trigger Chinese companies to resume listing in New York.
Under the new rules, starting March 31, the China Securities Regulatory Commission (CSRC) will review all applications for overseas listings. The regulator has the power to block such IPOs, and the rules make it clear that listings must not endanger national security.
“China remains committed to further opening up its capital markets,” the CSRC said on Friday.
Chinese overseas listings have stalled since DiDi Global’s U.S. IPO in 2021. The ride-hailing agency’s decision to go public in New York prompted Chinese authorities to launch an investigation into alleged violations of the country’s privacy and national security laws.
In July 2021, Beijing announced new rules requiring tech companies with more than 1 million users to undergo cybersecurity screening before going abroad.
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China also banned DiDi from adding new users, and the company was eventually delisted from the New York Stock Exchange last year.
After China’s fierce reaction to DiDi’s listing, the new rules offer hope to Chinese companies seeking overseas listings. There is now a formal process, but it involves another regulatory hurdle to overcome.
As for DiDi, the company is unlikely to return to the US after its ill-fated 11-month stint on the New York Stock Exchange.
Chinese companies such as Alibaba (Ticker: BABA) and JD.com are already listed on the US market
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(JD) will not be affected by the new rules applying to new entries.
However, companies already listed outside of China must register with the CRSC. The regulator will also oversee companies with VIE (Variable Interest Entity) structures, such as Alibaba and JD.com
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A VIE structure allows companies to bypass Beijing’s foreign investment restrictions.
The regulator added that it will allow filings from VIE structured entities and will assist them in raising capital domestically and internationally, Reuters reported.
Alibaba (9988.Hong Kong) shares fell 2.6% in trading in Hong Kong on Friday after rules were laid, and was broadly unchanged on Monday. JD.com
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The stock (9618.Hong Kong) fell 2% on Friday and 1.5% on Monday.
Write to Callum Keown at [email protected]
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