Regulatory Efforts Aim to Expedite IPOs Amid Sluggish Fundraising Environment, Reuters reports.
Regulators in mainland China and Hong Kong have urged major investment banks to accelerate the pace of offshore listings for Chinese companies, according to sources familiar with the matter. The move is part of a broader effort to stimulate overseas fundraising and support China’s slowing economy.
The China Securities Regulatory Commission (CSRC) convened two closed-door meetings in October with representatives from over 10 banks and law firms, including JPMorgan, Morgan Stanley, Goldman Sachs, UBS, CICC, and Huatai Securities. The CSRC reportedly encouraged intermediaries to expedite share offerings for companies already approved for offshore listings.
Similarly, the Hong Kong Exchanges and Clearing Ltd (HKEX) has been holding one-on-one meetings with global and Chinese banks to streamline the listing process for mainland companies. Both efforts reflect a shift in strategy following a period of increased regulatory scrutiny that had significantly slowed offshore fundraising activities.
The CSRC’s October meetings signaled a pivot from its earlier cautious stance on offshore initial public offerings (IPOs), which followed the introduction of stricter listing rules in March 2023. This regulatory tightening, combined with geopolitical tensions and market volatility, had led to a sharp decline in Chinese firms’ fundraising activities overseas.
According to sources, the CSRC’s goal is to prioritize “successful cases” of high-profile listings that can bolster market confidence rather than flood the market with new approvals. The emphasis on quality over quantity highlights the regulator’s intent to stabilize the market and restore investor trust.
At the same time, Hong Kong’s exchange operator, HKEX, is working to optimize the listing process for Chinese firms, with a particular focus on speeding up “second listings” — where companies already listed on the mainland seek to raise additional funds in Hong Kong. This approach aims to reduce the time required for approvals and increase the city’s appeal as a fundraising hub.
A senior equity capital market banker at a global firm projected that second listings could account for around 50% of Hong Kong’s total listings business by 2025, a substantial increase from the current rate.
China’s regulatory environment for offshore listings has shifted dramatically since 2021. A crackdown on tech giants and increased scrutiny of data security concerns, exemplified by the investigation into ride-hailing giant Didi, led to a freeze on overseas listings for many companies.
Total fundraising by Chinese companies through IPOs and secondary listings in Hong Kong and the US dropped to $14 billion in 2022, down 75% from the previous year. Listings of Chinese firms in US markets plummeted by 96% over the same period, driven by concerns over tighter US audit regulations and China’s data security measures.
In response, Chinese regulators introduced new offshore IPO rules in March 2023. While the rules aimed to ensure better oversight, they inadvertently created longer wait times for approvals, adding further delays to a market already hindered by weak investor sentiment, geopolitical tensions, and high-interest rate environments.
Hong Kong has long been the preferred destination for offshore listings by Chinese companies, with its regulatory environment seen as more favorable than New York amid heightened US-China tensions. With President-elect Donald Trump set to return to office, Chinese firms are expected to continue prioritizing listings in Hong Kong rather than US markets, where stricter listing rules are anticipated.
The HKEX has around 90 active listing applications in the pipeline, according to the bourse operator. Officials at the exchange have actively engaged with investment bankers to identify bottlenecks and inefficiencies in the listing process, particularly for second listings.
The renewed push to accelerate offshore listings comes at a critical time for China’s economy, which is grappling with slowing growth, weakened investor sentiment, and tighter global liquidity. By encouraging successful offshore IPOs and secondary listings, regulators hope to demonstrate stability in China’s capital markets and attract global investors.
While the CSRC has not publicly commented on the meetings, its approach to prioritizing high-profile listings is seen as a confidence-building measure. Success in this effort could increase the appeal of Chinese firms to international investors, especially as geopolitical headwinds push Chinese firms away from U.S. capital markets.
For Hong Kong, a surge in offshore listings could provide a much-needed boost to the city’s economy, which has struggled with the aftermath of pro-democracy protests, a talent exodus, and an economic slowdown. A rise in listing volumes would also support Hong Kong’s ambition to maintain its status as Asia’s leading financial hub.
