China's securities watchdog on Friday proposed tightening rules governing Chinese companies listing abroad, which it said would improve oversight while allowing them to continue to do so, the latest in a spate of regulatory moves by Beijing in 2021.
The draft rules, which had been keenly awaited by investors and were posted by the China Securities Regulatory Commission on its website, extend the CSRC's oversight of offshore listings to Chinese firms with variable interest entity structures.
Previously, the regulator would only examine companies incorporated onshore in China that proposed an offshore listing, such as in Hong Kong. Most offshore-listed Chinese tech firms, including Alibaba Group Holdings and JD.com Inc , use the structures, which give them more flexibility to raise capital, while also bypassing the scrutiny and lengthy IPO vetting process that locally-incorporated companies have to go through.
It will also require international banks that underwrite a Chinese firm's offshore listing to register with the CSRC.Offshore IPOs have provided an alternative source of capital for Chinese companies and a New York listing has been seen as a badge of honor for many.
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