China Sets Formal Regulations For International IPOs

There is now more clarity regarding whether Chinese companies can list abroad in the United States.

Late Friday night, the China Securities Regulatory Commission unveiled new guidelines that call for domestic businesses to abide by national security measures and the law protecting personal data before going public abroad.

The variable interest entity structure that Chinese companies frequently use when going public in the United States is not prohibited by the securities regulator’s regulations. A listing is created by the VIE structure through a shell company, frequently based in the Cayman Islands.

The CSRC announced that its overseas listing regulations would go into effect on March 31. The regulations resemble a draft that was released in late 2021 but didn’t have an implementation date.

The new regulations also mandate that IPO underwriters, who are typically foreign investment banks, submit an annual report to the CSRC detailing their participation in Chinese listings abroad.

The CSRC added that sharing false information or otherwise breaking the rules could result in fines of up to 10 million yuan ($1.5 million) for businesses or individuals.

The Chinese government has announced new regulations for safeguarding personal information and national security over the past two years.

Notably, China’s cybersecurity regulator stated that internet platform operators with personal data of more than 1 million users had to apply for a cybersecurity review before they could list abroad following Didi’s massive U.S. IPO in June 2021.

This year, more China-based companies are returning to the U.S. IPO market after an 18-month hiatus in foreign listings. The risk of delisting was significantly decreased last year, according to U.S. inspectors, who were able to review the audit work papers of Chinese companies that are listed in the U.S.

(Adapted from

Categories: Economy & Finance, Entrepreneurship, Geopolitics, Regulations & Legal, Strategy, Sustainability

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