The China Securities and Regulatory Commission has published draft rules that will affect Chinese companies listed in the stock exchanges based in the United States. This securities regulator’s new filing-based system published last Friday, December 24, is reportedly going to ease uncertainty for the US stock market-listed Chinese firms.
We find this US stock market-related report important for our followers to read. After all, we gathered that Chinese firms listed in the New York Stock Exchange and other United States-based stock exchanges like Didi Global Incorporated were placed under the spotlight this year.
These companies reportedly left the Chinese government perturbed for reasons like national security. By sharing this news with our readers, we think they will be properly updated regarding these significant events in the global stock market.
According to the Monday, December 27, 2021 news posted online by Malaysian newspaper The Star, the China Securities and Regulatory Commission’s new rules cover all kinds of offshore share sales, including flotation via Special Purpose Acquisition Companies or SPACs and initial public offerings.
Moreover, the published draft rules cover backdoor listings and secondary listings. The China Securities and Regulatory Commission’s new rules require filings by Chinese companies seeking offshore listings under a framework to ensure they comply with Mainland China’s regulations and laws.
Furthermore, the planned filing-based system is anticipated to ease uncertainty by calling for closer coordination between various industry regulators like the cyberspace watchdog and the securities regulator.
Ming Jin is Managing Partner at Cygnus Equity, a Chinese boutique investment bank with branches in Beijing and Shanghai, China. He pointed out that the draft rules’ issuance demonstrates that major communication barriers had been eliminated between diverse regulatory bodies.
Reaction to the China Securities and Regulatory Commission’s new rules will be seen today when the US stock market resumes trading after closing last Friday, December 24, for the Christmas holiday. Meanwhile, Hong Kong stocks will resume trading tomorrow, December 28.
This year, Chinese companies raised US$12.8 billion in the United States. The deals’ value ground to a halt following Didi Global Incorporated’s July listing.
Chinese firms utilizing a so-called variable interest entity or VIE structure will still be permitted to seek offshore listings as long as they are compliant. This fact eliminates the apprehension of investors who worried Mainland China would block such listings.
In July, such risk loomed large after Didi Global Incorporated’s US stock market listing sparked a significant regulatory backlash from Chinese officials who reportedly felt anxious about national security.
Most overseas-listed Chinese technology companies like JD.com and Alibaba have used the VIE structure to skirt Chinese restrictions on foreign investment in certain industries. We appreciate that the China Securities and Regulatory Commission has published draft rules.
We understand that the securities regulator designed its new filing-based system to control the once-freewheeling listings of Chinese firms in the US stock market and elsewhere.
We believe the China Securities and Regulatory Commission’s published draft rules are systemic, market-oriented, and comprehensive. Additionally, we think these new rules will ease the regulatory dilemma that stalled some Chinese companies’ offshore listings and roiled financial markets this 2021.