Workers from China Telecom install mini 5G base stations at a telephone booth in Shanghai. Photo: AFP

China Telecom, one of the country's three major telecom operators that exited the New York Stock Exchange earlier this year, began taking subscriptions on Monday for a listing on the Shanghai Stock Exchange, in what would be the world's biggest IPO so far in 2021. 

It would also make the company one of the first US-listed Chinese firms to return to the A-share market amid Washington's "decoupling" push, which extends from technology to the financial sector.

Industry insiders said that China Telecom's IPO underscores an accelerated "home-coming" streak among Chinese companies listed in the US - where mounting policy uncertainty is reducing the attractiveness of listing there - while Chinese investors' deep pockets and improved capital infrastructure are giving the trend a leg up. 

China Telecom aims to raise 47.1 billion ($7.3 billion) according to a filing with the Shanghai Stock Exchange on Friday. The shares will be priced at 4.53 yuan. If an over-allotment option was exercised, the Shanghai IPO would raise more than 54 billion yuan, market analysts said.

The offering marks the world's largest new listing in more than a year, exceeding the $6.3 billion IPO by short video platform Kuaishou in February. It will also be the fifth-largest IPO in the history of the A-share market, highlighting the deep pool of domestic capital the telecom operator is able to access.

In 2002, China Telecom became one of the first state-owned enterprises to list in the US. In March, China Telecom said in a filing that it would seek an IPO in the A-share market, after the telecom operator, along with China Mobile and China Unicom, were delisted by the New York Stock Exchange in January following an executive order signed by former US president Donald Trump on Washington's accusation that the operators have links with the Chinese military. 

China Mobile also announced in May that it plans to issue up to 964.8 million shares in the A-share market. 

"China Telecom's Shanghai IPO comes at a delicate time, and it is set to play an exemplary role for Chinese companies listed in the US, which have already been jolted by US stock regulators' increasingly hostile attitude toward Chinese companies" and lingering political tensions between the world's two largest economies, a senior executive of a US-listed tech firm, who spoke on condition of anonymity, told the Global Times on Monday.

According to the executive, discussions on "home-coming" have been going for some time among US-listed Chinese companies, in particular in "sensitive sectors" that handle Chinese residents' data.

"It is too costly and time-consuming for us to directly quit the US market, so a more likely choice is to hedge with a second listing in Hong Kong, whose Class A ordinary shares are convertible with American depositary shares on the US stock exchanges," the executive said, describing the second listing as a transitional strategy and a "way out". 

This year, a group of US-listed Chinese enterprises, including electric car producers Xpeng and Lixiang, video platform Blibli, tech giant Baidu, Autohome and Yidu Tech all launched secondary listings in Hong Kong.

The US Securities and Exchange Commission said in July that for IPOs, China-based operating companies need to provide additional risk disclosures. Reuters reported earlier that the US securities regulator will halt processing Chinese company listings.

In December 2020, the US enacted the "Holding Foreign Companies Accountable Act," which contains measures that would force foreign companies to adhere to US securities law, while some of the act's content explicitly targets Chinese firms. 

The China-US stand-off, plus Chinese regulators' stepped-up supervision of overseas-listed technology firms, has led to a decline of valuation of many Chinese companies, and this in turn prompts them to raise money in Chinese capital market, where markets are relatively stable and investors understand their values better, according to the executive.

"In the past, many cash-hungry Chinese start-ups had no choice but to list abroad. If they had sought to launch IPO in China, they were required to show profits for three consecutive years. 

"The process for Chinese regulators to accept IPO documents needed a longer time," Wang Peng, an assistant professor at the Gaoling School of Artificial Intelligence at the Renmin University of China, told the Global Times on Monday. 

But now China's financial infrastructure has basically matured with the launch of the Nasdaq-style ChiNext and registration-based STAR market, which makes the market more attractive for Chinese companies, Wang said, stressing that the shifting tide also mirrors the stable growth of the Chinese economy.

As of May 5, there were 248 Chinese companies listed on US exchanges with a total market capitalization of $2.1 trillion, according to data released by the US-China Economic and Security Review Commission.