China set to end IPO freeze with new approval process
Print Edition
China’s securities regulator could streamline its approvals process for some initial public offerings by next January, the regulator said yesterday, mapping out reform measures.
The plan came about two weeks after a reform plan unveiled by the Communist Party of China Central Committee, which promised to introduce a registration-based system. But firms would still need to wait for China to restart the IPO market, frozen since October last year after authorities suspended listings in a bid to stamp out equity market fraud.
“After the announcement of these opinions, there would need to be around one month of preparatory work before firms could complete the necessary procedures,” the China Securities Regulatory Commission (CSRC) said on its website.
“We predict around 50 companies may be able to complete their registration procedures for IPO by January next year.”
There have been prior reports of the IPO drought coming to an end, but yesterday’s statement gives the strongest hint that China is contemplating the resumption of mainland listings.
The IPO issuance in China has been put on hold in the country’s stock markets since October last year, with around 700 firms left in the IPO pipeline.
The reforms were a key step in overhauling a lengthy approval process and moving it to a system based on registration to give the market a more prominent role, the regulator added.
Reviews of new listing candidates will be more transparent, and the process will be made public at the same time. By increasing transparency, the CSRC said it will endeavor to allow the public to monitor the whole reviewing process.
“After our sector audit, when and how new shares are issued will be under market constraints and will be independently decided, while pricing of shares will more closely reflect true levels of supply and demand,” it said.
The reform will pull China’s IPO vetting process closer to those of developed countries, where firms register their IPOs and face a rigorous audit before listing.
China also announced details of a trial run for Chinese-listed firms to issue preferred shares.
Investors have long complained that too many listed firms are required to sacrifice profits for wider policy aims. Many saw use of preferred shares as a way to dilute government influence and boost the value of other investors’ holdings.
IPO reform would not mean deregulation, the regulator cautioned, saying it would toughen monitoring of the sector and step up punishments for non-compliance.
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