Photo:VCG

China's top securities regulator on Friday issued rules for overseas listings of Chinese firms. The new rules will give clear legal guidance to Chinese companies seeking overseas listing in markets such as the US and inject new vitality into the global capital market and economy, experts said.

It also serves as a strong rebuttal to hype from certain Western media that Chinese authorities have banned its companies from using variable interest entity (VIE) structures to seek IPOs abroad, analysts said, stressing that the new rules send a resounding signal of China's unswerving push for two-way capital market opening-up.  

The China Securities Regulatory Commission (CSRC) on Friday issued a 35-point rule for Chinese companies seeking listing overseas. The rules stressed an improvement in the supervision mechanism and requested that domestic companies seeking overseas direct or indirect listings fulfill their due filing and reporting obligations.

Illegal actions such as failing to fulfill filing procedures and falsifying filing materials will incur high legal costs, according to the rules.

For overseas listings of companies with VIE structure, CSRC said it will seek opinions from relevant authorities and record the filing of eligible companies. 

The issuance of the rules amid profound changes and growing uncertainties in the international environment shows that China will not change its direction of integrating development and security and pursuing an opening-up policy, CSRC said.

"The vision of sharing the dividends of China's economic development with global investors will not change," it said.

Analysts said that the legal framework is also necessary in terms of safeguarding China's national data security, considering that the practices of certain platforms in the collection and use of personal information may constitute a violation of laws, and overseas listing without approval could risk leaking sensitive personal data abroad. In extreme cases, some countries may use "back doors" to illegally obtain user data, analysts also warned. 

Didi announced to delist from the US market in December 2021, less than half a year after its listing in the US without putting the IPO on record on the Chinese side. 

Amid China's increased clampdown on data breaches and misuse, the company was fined 8.026 billion yuan ($1.2 billion) in July 2022 for violating cybersecurity, data security, personal information protection laws, and data handling that threatened national security, according to the Cyberspace Administration of China.

The rules also represent China's latest effort to make Chinese offshore companies seeking to list in the US market comply with the legislations of different jurisdictions, after China and the US reached an audit oversight cooperation agreement late last year.   

Chinese offshore companies listing in the US slowed down in recent years amid a flare-up of geopolitical tensions and year-long audit disputes between the world's two largest economies. Analysts said the new rules could partly help bring back companies' waning confidence, while the ball is in the US' court to stop its relentless crackdown against Chinese companies and create a fair environment.   

The Chinese government has made great efforts to further standardize and regulate the necessary procedures for Chinese companies to go abroad for listing in recent years while working closely with the US in audit supervision cooperation, Li Changan, a professor from the University of International Business and Economics, told the Global Times on Friday.

The latest move by the Chinese securities regulator also sends a very positive message as part of the follow-up of China's commitment to opening-up and connecting with the world, experts said, urging the US side to also treat Chinese companies fairly following the latest progress made in China-US audit oversight cooperation.

"We have always encouraged domestic companies to list overseas as part of the nation's important strategy for high-level opening-up to the outside world," Li said.

In addition to drawing more global attention and capital, the overseas listing of more Chinese companies will help them better integrate into the changing international market, which will not only boost the world's second largest economy but also inject more new momentum into the global economic recovery, Li said.