Chinese enterprises go overseas and take the road of diversification
On April 21, local time in the United States, 17 companies including Ideal Motors, Best Group and Shell were included in the "pre-delisting list" by the United States. On that day, Chinese concept stocks tumbled. Since March, 40 Chinese concept stocks have been included in the "pre-delisting list" by the US Securities Regulatory Commission.
However, with the positive progress in the communication between the regulatory agencies of China and the United States, the listing of Chinese companies in the United States has ushered in good news. On April 2, the China Securities Regulatory Commission issued the "Regulations on Strengthening the Confidentiality and Archives Management Work Related to the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comment)" to promote the orderly development of overseas securities issuance and listing activities by Chinese domestic enterprises. Since last year, Chinese concept stocks, which are active in the introduction of new regulations in the United States, have been cold for a while. With the release of new signals, what new changes will Chinese companies face in overseas listings?
The new regulations release positive signals
The draft for comments made adjustments to the original regulations in four aspects: improving the legal basis, adjusting the scope of application, clarifying corporate information security responsibilities, and improving cross-border regulatory cooperation arrangements. On April 2, the person in charge of the relevant department of the China Securities Regulatory Commission said in response to a reporter's question that the China Securities Regulatory Commission firmly supports companies in choosing their own listing places according to their own wishes.
"The new regulations have reduced uncertainty and market concerns, and will help Chinese companies to gradually speed up their overseas listings." Wang Jianhui, a senior industry researcher, said in an interview with a reporter from the International Business Daily that in recent years, Chinese companies have been active in overseas listings, but they are affected by The influence of U.S. policies, especially the "Foreign Company Accountability Law", once made Chinese stocks passive. Companies that originally hoped to go public in the United States stopped and watched, and some companies even announced that they would start delisting from the United States. Wind data shows that since August last year, only one Chinese company has successfully listed in the United States. Since March this year, the US Securities and Exchange Commission (SEC) has intensively announced five batches of "pre-delisted companies" lists.
Against this background, the draft for comments further regulates the overseas listing of Chinese enterprises, and also responds to the concerns of the US side, sending a positive signal to encourage and regulate the overseas listing of Chinese enterprises.
The special meeting held by the Financial Stability and Development Committee of the State Council on March 16 made it clear that the regulatory agencies of China and the United States have maintained good communication and have made positive progress, and are working on forming a specific cooperation plan. The Chinese government continues to support various types of companies to list overseas.
The head of the International Department of the China Securities Regulatory Commission said that China and the US Public Company Accounting Oversight Board (PCAOB) have had several rounds of candid, professional and efficient talks, and the overall progress has been smooth, and the communication between the two sides will continue. In December last year, documents such as the "Regulations of the State Council on the Administration of the Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comment)" and the "Administrative Measures for the Recordation of Overseas Issuance and Listing of Securities by Domestic Enterprises (Draft for Comment)" were released one after another to regulate domestic enterprises. Activities related to overseas issuance and listing of enterprises.
Analysts believe that under the above background, the consultation draft not only provides a plan to reduce the risk of "forced delisting" of Chinese concept stocks, promotes the connection between the financial markets of China and the United States, but also conveys to the outside world the practicality of promoting regulatory cooperation. . However, under the unilateralism and protectionist policies of the United States, there are still uncertainties in the listing of Chinese companies in the United States, and it will take three years to confirm whether any Chinese companies have been delisted due to the relevant provisions of the "Foreign Company Accountability Law".
More channels to go overseas
"The overseas listing of Chinese-funded enterprises plays an important role in promoting their overseas market expansion." Liu Xiangdong, deputy director of the Economic Research Department of the China International Economic Exchange Center, said in an interview with a reporter from the International Business Daily that although Chinese enterprises have encountered difficulties and obstacles in listing overseas, However, it is beneficial for enterprises to strengthen their integration with international regulatory rules and standards, to enhance their overseas image, and to expand international financing channels at a lower cost, so as to further expand transnational operations and accelerate the process of corporate globalization.
Liu Xiangdong further stated that at present, China has clarified the regulatory framework for the overseas listing of enterprises, and encourages and supports enterprises to go public overseas. Moreover, with the enhancement of connectivity between China and the international capital market, in addition to the United States, there are also Hong Kong and Hong Kong for overseas listing of Chinese-funded enterprises. Many channels are available in London, Switzerland, Singapore, etc.
According to statistics, as of March 25, the total market value of 281 Chinese concept stocks listed in the United States was about 1.19 trillion US dollars. At the same time, the number of companies seeking to land in other markets is increasing. From March 15th to 18th, Sany Heavy Industry, Guoxuan Hi-Tech, Lepu Medical, and Shanshan Co., Ltd. successively announced that they plan to issue global depositary receipts overseas. (GDR) and listed on the SIX Swiss Exchange. Prior to this, five Chinese companies have successfully issued GDRs in overseas capital markets and listed on the London Stock Exchange and the Frankfurt Stock Exchange respectively. Recently, a number of companies such as Wanwuyun and Sunshine Insurance plan to sprint to the Hong Kong Stock Exchange.
Wang Jianhui believes that there are diversified channels for Chinese enterprises to go public overseas, but whether the momentum can continue depends on the policy inclination and policy differences of each market. At the same time, due to the high level of internationalization, large capital volume and large transaction scale of the US market, other markets will serve as supplements for companies going overseas in the short term, and it will be difficult to replace the US market. In the future, it will be the general trend for Chinese companies to increase the compliance costs and regulatory costs of overseas listings, and they should be more fully prepared for uncertain factors. "In the final analysis, we must start from ourselves and maintain compliant and healthy operations and information disclosure."
Liu Xiangdong said that the rebound of Chinese concept stocks after the sell-off reflects that the overall fundamentals of Chinese concept stocks are still improving, and they are still favored by more overseas investors, which means that Chinese companies still have great prospects for overseas listing. However, the overseas listing of Chinese-funded enterprises is a double-edged sword. While bringing many benefits, it also increases their compliance constraints. Therefore, enterprises should do a good job of weighing the pros and cons, do due diligence, and do their homework to ensure compliance with domestic and overseas regulatory compliance requirements, and make better choices in multiple listing channels.