Exclusive-China regulators tell banks to expedite offshore company listings, sources say

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

SYDNEY/HONG KONG (Reuters) – Regulators in mainland China and Hong Kong have told some of the world’s biggest investment banks to help speed up Chinese companies’ listings in the city, said sources, in a bid to boost fundraising overseas and revitalise the world’s No. 2 economy.

The China Securities Regulatory Commission (CSRC) in October told two meetings, attended by a total of more than 10 banks and law firms, it was working towards speeding up some approvals for offshore listings, seven sources said.

Bankers from JPMorgan, Morgan Stanley (NYSE:MS), Goldman Sachs, UBS and Chinese firms CICC and Huatai Securities, among others, attended the meetings, according to the sources.

In a similar move, Hong Kong’s bourse operator has also initiated one-on-one meetings with major global and Chinese banks since October to discuss how to optimise the listing process for Chinese firms, two of the sources said.

The closed-door meetings and their details, which have not been reported previously, mark a strategic change for China after it framed rules for offshore fundraisings in March 2023, tightening scrutiny in a move that contributed to the sharp slowdown in offshore capital raisings over the last three years.

An unprecedented regulatory crackdown on the country’s marquee private enterprises, volatile markets, an economic slowdown and geopolitical tensions also squeezed Chinese companies’ overseas fundraisings.

The CSRC did not respond to a Reuters request for comment.

Goldman, Morgan Stanley and UBS declined to comment, while other banks did not respond to requests for comments.

All sources, who have knowledge of the matter, declined to be named as they were not authorised to speak to the media.

While CSRC officials did not specify any particular venue for speeding up offshore listings in the two meetings, Hong Kong is the preferred offshore fundraising destination for Chinese companies and grabs a bigger share than New York.

A pickup in listings would come as a boost to Hong Kong as some Chinese companies are expected to avoid fundraisings in the U.S. amid worries of worsening geopolitical tensions under President-elect Donald Trump.

A rebound in initial public offerings (IPOs) in Hong Kong will also tie in with Chinese policymakers’ recent public show of support to the city which has reeled from pro-democracy protests, a talent exodus and an economic slowdown in recent years.

“We welcome the listing of quality companies from Mainland China and around (the) world,” Hong Kong Exchanges and Clearing Ltd said in a statement, adding it has around 90 active listing applications in the pipeline.

REGULATORY CRACKDOWN

In one of the October meetings, the Chinese regulator urged the IPO intermediaries to help Chinese firms that were already approved by the regulator for listing their shares on offshore bourses launch their deals quicker, said two of the sources.

The intermediaries were told at the meetings that CSRC’s goal is to not flood the market with new approvals, but to facilitate some “successful cases” of high-profile deals that can boost market sentiment, said the two sources.

China introduced new offshore IPO rules in March last year after years of a laissez-faire approach. The resultant cautious stance of the watchdog and the involvement of more government agencies in approvals for listing candidates meant lengthy delays in fundraisings, bankers have said.

Chinese companies’ fundraisings in Hong Kong and the U.S. fell after Beijing launched an investigation into ride-hailing company Didi in mid-2021 and clamped down on other private businesses.

Total (EPA:TTEF) IPOs and second listings’ volumes fell to $14 billion in 2022, down 75% from the year earlier, with new listings by Chinese firms in the U.S. down 96% from 2021. Fundraising via offshore listings this year is only a third of the volume seen in 2021.

FAST-TRACKING SECOND LISTINGS

Offshore investors previously also shunned Chinese listings, and companies hesitated to float shares with suppressed valuations due to market volatility, a high-interest environment and geopolitical tensions.

During the meetings with investment bankers in Hong Kong in October, the city exchange officials urged them to identify bottlenecks in the listing application process of Chinese firms and share specific examples, two of the sources said.

An area of focus during the deliberations was fast-tracking second listings of companies already listed on the mainland, they said. The goal is to “significantly shorten” the time for such share sales in Hong Kong, one of them added.

CSRC is not concerned about second listings of A-share companies offshore draining liquidity on the mainland, one source and a separate source familiar with the regulatory thinking said.

The Hong Kong exchange in October shortened the time spent by the bourse and the city’s securities regulator on giving feedback for such listing applications.

A senior equity capital market banker of a global firm estimated second listings will rise to around 50% of the bourse’s listings business in 2025, up from only three such listings so far this year.