China is looking to coax tech listings, following a failed attempt with mainland investors, The Wall Street Journal (WSJ) reported on Thursday (Nov. 7).
After an unsuccessful plan to connect with Alibaba Group and other mainland investors, the move is jump-starting a project to attract China’s most innovative companies to list domestically. New rules from regulators are expected soon, sources told WSJ. The original plan concentrated on bigger firms, and fizzled after Alibaba and others “dragged their feet.”
“The planned rules would cover both companies with international stock listings and startups, the people said, and will apply to the Shanghai Stock Exchange’s new Science and Technology Innovation Board, dubbed the Star market,” the article said.
The new regulations will tackle complex matters that have been technological issues for Chinese startups and their investors — such as “the repatriation of proceeds, and limitations on existing shareholders’ ability to sell their shares,” the source said.
“China has capital controls, which makes it difficult to move money abroad after an initial public offering [IPO], and major investors are often subject to long lockup periods in which they aren’t allowed to sell down their stakes,” the article added.
Companies in China are regularly integrated with offshore locations, like the Cayman Islands. The proposed arrangement would give firms that are incorporated abroad the ability to list in mainland China, sources told WSJ. The firms could then get venture capital funding from international investors, which Chinese laws on foreign ownership would typically forbid.
According to WSJ, “key initiatives” would include dropping the “market-capitalization threshold for overseas-listed tech companies” to a ceiling of $14.29 billion. Last year’s “¥200 billion [$1.8 billion USD] threshold kept a lot of quality companies out, and regulators want to change that,” the source added.
China said in November that it has changed some IPO rules to entice more tech companies to list publicly in the country. China had previously attempted this, and was focusing on large companies like Alibaba Group, but the plan never came to fruition due to a number of factors, including trade tensions and a lack of political support.
The new rules will cover startups, as well as companies with international listings.