China Securities Regulatory Commission (CSRC) has released an announcement on 17th February 2023 towards a new regulations for Filing-based Administration of Overseas Offering and Listing. Starting on March 31, 2023, all overseas listing applications will be vetted in China under the new regulations.
The purpose of this regulation is to provide a higher barrier of entry and provide more authority for the regulator such as blocking IPOs, create a more transparent listing which would help to defend and protect their national security. With the new regulations for overseas IPOs , it may also encourage Chinese corporations to list again in New York.
DiDi Global
In 2021, DiDi Global had launched their IPO’s in the US and the Chinese authorities had launched a probe which stated DiDi Global had allegedly violated the country’s data privacy and national security laws.
After the announcement towards DIDI Global by the Chinese authorities, Beijing had proposed a new regulations in July 2021 that call for tech companies with more than 1 million users to undergo a cybersecurity evaluation before to going public overseas. Moreover, DiDi were banned from receiving new users in their platform which eventually lead to DiDi delisted from New York in 2022.
Opening Up the Capital Markets
Due to the DiDi’s cases in China, it has created strong reaction by the locals and most of the Chinese companies are afraid to approach overseas listing. However, with the new offers offers by the CSRC, the authorities hopes that these new rules would promote an create more hopes for Chinese companies that wanting to be listed overseas. “China stays committed to further opening up its capital markets,” as the CSRC stated. On the other hand, it would also means that the next regulatory hurdles will be added into the regulations. As for DiDi, due to the ill-fated 11 months in the New York Stock Exchange, it’s less likely that the company will try to approach listing in New York again.
Alibaba and JD
Other than DiDi, the two major e-commerce platform from China JD and Alibaba have been listed in the U.S market. Even though both companies will not be affected by the new rules, the variable interest entity–VIE–structures must be registered with the CSRC in order for the regulators to oversight over the companies meanwhile permits firms to get around Beijing’s limitations on foreign investment. According to a report by Reuters, the regulator also said that they will support VIE-structured enterprises in filing documents and helping them raise funds both locally and internationally.
