China intends to remove a technicality that permitted the country’s tech sector from raising overseas investments by prohibiting companies from making an initial public offering (IPO) on foreign stock markets through variable interest entities, according to a Wednesday (Dec. 1) Bloomberg report.
The potential ban is part of a new version of China’s overseas listing rules, which could be formalized later this month.
The China Securities Regulatory Commission (CSRC) first moved toward barring technology firms from listing on foreign markets in August, according to PYMNTS. At the time, the CSRC intended to establish the new regulations near the fourth quarter of this year.
At issue is the collection of sensitive data. Firms that do not collect such data, like pharmaceutical companies, would likely receive the go-ahead for public listings overseas.
China is also creating a cross-ministry council that would grant official approval for public listings in foreign markets, according to PYMNTS.
See also: Chinese Securities Boss Looks To Bar Some Tech Startups From Foreign IPOs
Meanwhile, the U.S. Securities and Exchange Commission (SEC), in August halted Chinese listings on the New York stock exchange, according to PYMNTS.
The purpose of the Chinese listing freeze was to inform investors of the risks involved and to provide Chinese companies with more detailed SEC instructions about disclosing offshore vehicles, dubbed variable interest entities (VIEs), for their IPOs.
In addition to the potential ramifications for investors, there is a chance that Chinese authorities could interfere with the operations, according to the SEC.
Read more: SEC Now Asking Chinese Firms For Variable Interest Entity Disclosures, Report Says
Under the proposed regulation in China, companies operating as a VIE could still seek IPOs in Hong Kong pursuant to regulatory authorization. Firms that are listed in the U.S. and Hong Kong as a VIE would need to modify their ownership information to be more transparent in regulatory reviews.
In August, Chinese-based ride-hailing company Didi Global rescinded plans to launch in the U.K. and Europe stemming from Chinese regulatory pressures related to cybersecurity concerns, according to PYMNTS.
More information: Didi Cuts Back On UK Launch Amid Regulatory Issues
The company listed its shares in New York in June, netting $4.4 billion in its IPO.
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