China toughens overseas listing rules amid Didi fallout

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BEIJING: Beijing has tightened the rules on overseas listings of Chinese companies in a series of new regulations that tighten oversight of companies seeking to raise funds on foreign stock markets.
China has stepped up scrutiny of major overseas listings after a controversial New York IPO by ride-sharing giant Didi Chuxing took place this year, despite regulatory woes in the country.
In the latest move to increase surveillance, authorities said on Monday that companies in sectors where foreign investment is banned – due to a “negative list” – will need to seek approval from the authorities to make their debut. abroad.
Total ownership of foreign investors will be capped at 30%, while a single investor is not expected to own more than 10%, according to the updated list of foreign ownership restrictions taking effect from January.
Foreign investors are also “not allowed to participate in the operations and management” of the company, according to a joint statement from the Ministry of Commerce and the National Development and Reform Commission.
It came days after authorities proposed that companies seeking IPOs overseas should register with the securities regulator.
Registration will be blocked if it can be considered a threat to national security.
Some of China’s largest companies are listed on U.S. stock markets in search of more developed markets and new lines of liquidity from a massive investor base, but enthusiasm has waned amid mounting tensions between Beijing and Washington.
Beijing also launched a sweeping regulatory crackdown over the past year to curb the rampant growth of China’s powerful internet industry and curb the influence of big business.
Following Didi’s New York listing, authorities shocked investors by launching cybersecurity investigations into the company – before ordering its removal from app stores and expanding investigations to other companies Chinese listed in the United States.
Didi announced this month that he would withdraw from the New York Stock Exchange, shortly after U.S. regulators passed a rule that would allow them to pull foreign companies.
The Chinese government has encouraged companies to list on national stock exchanges instead, in order to protect information and data going abroad and develop the country’s capital markets.
Latest regulatory moves come before a ban on offshore structures known as Variable Interest Entities (VIEs) – structures that have allowed tech giants like Alibaba and Tencent to avoid restrictions on investments foreign and overseas listings in recent decades.
But the restrictions will make VIE structures “less attractive” and “foreign listings less attractive to Chinese founders and investors,” Angela Zhang, a law professor at the University of Hong Kong, told AFP.
The rule will not affect companies already listed abroad.
Regulators also suggested earlier that companies with at least one million users undergo a cybersecurity review before going public overseas.
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