China’s regulator issued a draft proposal to ease rules for initial public offerings across all its trading venues in a bid fuel access to funding in the nation’s $11 trillion equity market for millions of smaller companies.
(Bloomberg) — China’s regulator issued a draft proposal to ease rules for initial public offerings across all its trading venues in a bid fuel access to funding in the nation’s $11 trillion equity market for millions of smaller companies.
The proposal aims to roll out a registration based listing mechanism to all domestic stock exchanges, the China Securities Regulatory Commission said in a statement Wednesday. The regulator is now seeking public feedback on the draft rules until Feb. 16.
The change would mean an end to vetting of planned share sales by regulators. It builds on rules adopted by Shanghai’s Star board in 2019, Shenzhen’s ChiNext board in 2020 and the Beijing Stock Exchange in 2021 and will shorten review periods and ease domestic listings.
Yi Huiman, chairman of the securities regulator, said in November that reforms should be deepened going forward.
The move adds to a decade-long effort to liberalize the stock market just as tensions with the U.S. on trade, technology and audit inspections have been driving more Chinese firms to sell shares at home. Expediting the listing process and allowing more freedom in setting prices, will likely further propel the country’s IPO market that bucked a global slump last year with a record $92 billion in proceeds.
Listings on the main boards of Shanghai and Shenzhen exchanges will still need regulatory approval from the CSRC before the new rules take effect, the watchdog said. Trading rules on the boards will also be modified, with no daily limits for the first five trading days but with a cap of 10% on both sides starting on the sixth day.
The wider adoption of the experiment, based on US models, was an acknowledgment of the success of the yearslong pilot program to let market forces play a bigger role, aligning Chinese bourses closer with their global peers.
The reform has attracted a number of high profile offerings. On Shanghai’s technology-focused Star board, chipmaker Semiconductor Manufacturing International Corp. raised 53 billion yuan ($7.9 billion) domestically in July 2020. Seed and fertilizer giant Syngenta Group was expected to launch a potential 65 billion yuan listing on the board in 2022, paving the way for one of the world’s biggest listings.
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