Regulators Urge Investment Banks to Speed Up Chinese Listings

By Selena Li, Scott Murdoch, Julie Zhu, and Kane Wu

Regulators in mainland China and Hong Kong have instructed major investment banks to expedite Chinese companies' listings in the city to enhance overseas fundraising and rejuvenate the economy.

In October, the China Securities Regulatory Commission (CSRC) convened two meetings with over 10 banks and law firms, discussing acceleration of offshore listing approvals.

Prominent banks such as JPMorgan, Morgan Stanley, Goldman Sachs, UBS, and Chinese firms CICC and Huatai Securities participated in these discussions.

Similarly, Hong Kong's stock exchange operator has embarked on one-on-one meetings with key banks since October to optimize the listing process for Chinese firms.

These closed-door meetings signal a strategic shift for China following tighter regulations on offshore fundraising established in March 2023, which had slowed capital raising for three years.

Challenges such as regulatory crackdowns on private enterprises, volatile markets, economic downturns, and geopolitical issues have intensified the difficulties for Chinese companies seeking overseas funding.

While specific venues for faster offshore listings were not confirmed, Hong Kong remains the preferred destination for Chinese companies, outweighing New York.

An upsurge in IPOs would benefit Hong Kong, especially as companies consider avoiding U.S. fundraisings due to rising geopolitical tensions.

A rebound would align with recent policy support for Hong Kong, which has faced economic struggles and a talent exodus following pro-democracy movements.

According to Hong Kong Exchanges and Clearing Ltd, there are currently around 90 active listing applications in the pipeline.

Regulatory Crackdown and Fast-Tracking Listings

In one meeting, the Chinese regulator motivated IPO intermediaries to expedite offshore listings for firms already approved by the CSRC. The intention is to facilitate standout listings that would boost market confidence rather than flooding it with new approvals.

New offshore IPO rules were introduced in March 2022, moving away from previous leniencies, resulting in delays due to increased scrutiny and government involvement in approval processes.

As a result, Chinese companies saw IPO and second listing volumes drop significantly, with fundraising via offshore listings this year only reaching a third of 2021's volume.

During discussions in Hong Kong, exchange officials emphasized identifying hurdles in the application process and illustrated a focus on fast-tracking second listings for companies already present on the mainland.

CSRC does not view second listings as a risk for mainland liquidity. The exchange has also shortened feedback times for listing applications. A senior banker predicts that second listings could comprise around 50% of the exchange's listings by 2025, a sharp rise from three listings so far this year.