In This Article:
* New rules ease fears of China might block overseas VIE listings
* Doubts remain, though, over enforcement, compliance criteria
* Closer coordination among Chinese regulators a plus (Adds CICC comments)
By Kane Wu and Julie Zhu
HONG KONG, Dec 25 (Reuters) - China's plan to tighten scrutiny over mainland companies' overseas share sales is likely to ease the regulatory uncertainty that roiled financial markets this year and stalled offshore listings, bankers and analysts said.
But the securities regulator's new filing-based system, designed to rein in once freewheeling Chinese listings in the U.S. market and elsewhere, leaves open questions about rule enforcement and compliance criteria, they added.
"The new rules represent a comprehensive, systemic and market-oriented regulatory upgrade," investment bank China International Capital Corp (CICC) said in a note, but added they contain "some items that need further observation, and clarification".
The China Securities and Regulatory Commission published draft rules https://www.reuters.com/markets/europe/china-securities-regulator-says-vie-compliant-companies-can-list-overseas-2021-12-24 late on Friday requiring filings by companies seeking offshore listings under a framework to ensure they comply with Chinese laws and regulations.
Companies using a so-called variable interest entity (VIE) structure will still be allowed to seek offshore listings as long as they are compliant, removing uncertainty for investors who feared China would block such listings.
That risk loomed large after Didi Global Inc's U.S. listing in July sparked a major regulatory backlash from Chinese officials, who were concerned over national security.
The VIE structure has been used by most overseas-listed Chinese tech companies, such as Alibaba and JD.com, to skirt Chinese restrictions on foreign investment in certain sectors.
Uncertainty over the future of VIE structures, coupled with China's regulatory crackdowns in major sectors such as e-commerce and tutoring, has bashed shares in offshore-listed Chinese companies this year.
And while Chinese firms raised $12.8 billion in the United States this year, the value of deals ground to a halt after Didi's July listing. In Hong Kong, the value of IPOs in 2021 fell to $26.7 billion from the previous year's $32.1 billion, according to Refinitiv data.
REGULATORY COORDINATION
Reaction to the new rules will be seen Monday when the U.S stock market resumes trade after closing on Friday for the Christmas holiday. Hong Kong stocks will resume trading on Tuesday.