Chinese authorities have issued formal guidelines to govern the overseas initial public offerings (IPOS) of its domestic companies.
The China Securities Regulatory Commission (CSRC) has announced new rules that require domestic Chinese companies to comply with national security measures and personal data protection laws before going public on overseas stock exchanges.
The securities regulator’s rules do not ban the variable interest entity structure commonly used by Chinese companies when listing in the U.S. That structure effectively creates a listing through a shell company, often based in the Cayman Islands.
The Chinese regulator said its rules for overseas listings are set to take effect on March 31 of this year. The rules are similar to a draft published in 2021, which had no implementation date.
The new rules also call for IPO underwriters, typically investment banks, to annually report to the regulator their involvement with Chinese listings overseas.
Companies or individuals can be fined up to 10 million yuan ($1.5 million U.S.) for sharing misleading information or violating the new IPO rules, according to the securities regulator.
The new rules come after an 18-month decline in overseas listings among Chinese firms. However, several China-based companies say they are now planning a U.S. IPO this year.
