China unveils final rules of trial listing plan for Big Tech

Investors at a securities brokerage in Shanghai. The rapid development of a framework for Chinese depositary receipts highlights policymakers' determination to find a way to have the likes of Alibaba and Baidu list in China.
Investors at a securities brokerage in Shanghai. The rapid development of a framework for Chinese depositary receipts highlights policymakers' determination to find a way to have the likes of Alibaba and Baidu list in China.PHOTO: BLOOMBERG

Chinese depositary receipts programme aims to woo technology giants back to country

BEIJING • China published the final rules of a trial programme for securities that would allow companies such as Alibaba to list on domestic exchanges, a major step in the country's push to bring some of the world's biggest technology firms back home.

The China Securities Regulatory Commission (CSRC) unveiled the details on its website on Wednesday.

The regulations are broadly in line with published draft proposals.

The State Council, China's equivalent of a national Cabinet, announced the Chinese depositary receipts (CDR) trial programme in March.

The rapid development of a framework for CDRs highlights policymakers' determination to find a way to have the likes of Alibaba and Baidu list in China.

Most of China's tech giants have gone public in New York or Hong Kong to better access international capital, leaving the local market reliant on state-run industries.

CDRs are now available for trial in the world's second-biggest market.

The final rules came faster than expected and demonstrated the regulators' support of the business, Huatai Securities analysts wrote in a note yesterday.

Most of the pilot companies' CDR issuance could be completed by the year end, they added.

Stock exchanges in Shanghai and Shenzhen will conduct broker tests for CDRs in the next two weeks, according to the official Shanghai Securities News. It cited sources saying the first CDRs are expected to start trading as soon as next month.

The push led to a deluge of founders and chief executives pledging to bring their companies home once the laws are clearer.

Since the idea of CDRs was floated during the tightly scripted "Two Sessions" meeting of political bodies in Beijing in March, Alibaba, JD.com, Tencent Holdings, Xiaomi, and China's two biggest search giants Baidu and Sogou have expressed a wish to list on exchanges in the country.

Companies that went public overseas and have a market value of more than 200 billion yuan (S$42 billion) can apply for CDRs, and corporate structures that are not permitted in China will be allowed.

Funds raised with the listings can be moved offshore, according to the CSRC.

Wednesday's rules added further requirements, including that companies must have generally accepted accounting standards and healthy inner control measures, and that directors and senior executives must have good reputations and no significant legal blemishes.

The regulator said it will strictly control the number of companies and amounts raised in the CDR trial, and said it hopes the market will not engage in speculation.

The CSRC also published revisions to related rules governing initial public offerings. The changes exempt unprofitable pilot companies from a clause that suspends the sponsor's licence for three months if a firm reports a loss for the year it went public.

BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on June 08, 2018, with the headline 'China unveils final rules of trial listing plan for Big Tech'. Print Edition | Subscribe