Regulatory review of 760 companies under way as China prepares to relaunch IPO market
About 50 Chinese companies will launch, or be ready to launch, an IPO by the end of January 2014, according to the China Securities Regulatory Commission (CSRC).
A further 760 companies are awaiting permission from regulators to launch IPOs and a review of these requests will take about a year, the regulator announced at the weekend, further raising expectations of an imminent resumption of Chinese IPOs.
The government is preparing to release new rules for its IPO market, which has been essentially frozen since November 2012 as regulators seek to adopt a ‘regulatory-based’ system instead of the current ‘approval-based’ system that has dramatically slowed issuance.
Under the approval-based system, the CSRC has exclusive powers to authorize a company to carry out an IPO. The process can take years and involve multiple interviews in which regulators seek to determine whether the company can sustain profitability. Under the regulatory-based system, companies would have to undergo legal and financial checks, but would be free to choose the timing and size of their IPOs.
China’s IPO market was the world’s largest in 2010, when $71 bn was raised. Any resumption of listings activity next year is expected to further boost the global market, which has grown by almost 28 percent in the first 11 months of 2013 from the same period last year – to a total of $118 bn raised – according to IPO specialists at Renaissance Capital.
The changes to China’s IPO markets form part of a larger reform covering 16 areas aimed at promoting ‘socialism with Chinese characteristics,’ the government says.
‘The plan emphasizes the importance of reducing government intervention in China’s economy, confining the state to maintaining macroeconomic stability, risk control and providing public goods and services,’ notes an HSBC analysis of the program. ‘The reforms should make China better prepared for financial opening up, [which will] attract foreign investors and expertise, and speed up the development of the onshore financial market.’