China Eases Rules on Overseas Listings as IPO Requests Swell
China relaxed rules for overseas listings, scrapping decade-old financial requirements on companies seeking to sell stock abroad as regulators study ways to clear a backlog of applications for domestic offerings.
New guidelines for first-time share sales on overseas markets, posted to the China Securities Regulatory Commission’s website late yesterday, will from next year replace a document issued in 1999. The rules “better accommodate” the financing needs of smaller companies, the regulator said.
The number of companies awaiting approval for IPOs in China swelled to more than 800 in December as regulators held back from reviewing new applications on concern a flood of shares may further weigh on the nation’s benchmark stock market, which is headed for a third straight year of decline. Domestic IPOs in the first 11 months raised less than half the amount a year earlier, data compiled by Bloomberg show.
Under the previous rules, companies were required to achieve annual net income of at least 60 million yuan ($9.6 million) and have net assets of 400 million yuan before they could apply to list outside China. The size of the IPOs could also be no less than $50 million, according to the 1999 rules.
The new rules don’t include these requirements. A company can apply with the CSRC to list overseas if it meets the standards of the market where it wants to sell stock, the CSRC said. Companies do need to meet other requirements, including getting relevant approvals from China’s environmental protection ministry and for government enterprises to have the approval of the state-owned assets supervisory commission.
Hong Kong will benefit from China’s policies to support companies’ overseas expansion, according to Deloitte Touche Tohmatsu CPA Ltd. Measures such as lowering the threshold for companies seeking to list in Hong Kong will encourage more small Chinese businesses to raise money in the city, the accounting firm said earlier this month.
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