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China Lowers Threshold for Overseas IPOs

Friday, 21 Dec 2012 | 12:24 AM ET
Shanghai stock exchange
Xu Changzheng | ChinaFotoPress | Getty Images
Shanghai stock exchange

China has lowered the bar for companies to list overseas to ease pressure on domestic stock markets where more than 800 companies are waiting for approval of their initial public offerings.

Currently Chinese companies applying for an overseas IPO must meet certain thresholds for net assets, profits and fundraising targets and must also agree to abide by Beijing's foreign capital investment rules.

(Read More: Why Chinese Investors Fear the Stock Market)

All of these requirements have been scrapped in the revised guidelines for overseas IPOs that were published by the China Securities Regulatory Commission (CSRC) on its website late on Thursday. The new rules will take effect on Jan. 1, it said.

The CSRC is encouraging Chinese companies to list overseas, sell bonds or trade on over-the-counter equity markets as regulators maintain a tight grip on supply on concerns over the strength of the stock market.

More than 800 Chinese companies are currently seeking approvals to list on the Shanghai or Shenzhen exchanges, aiming to raise an estimated 500 billion yuan ($80 billion) in total, Ernst & Young said earlier this week.

(Read More: Asia's 'Value' Stocks Could Surge 20% in 2013: HSBC)

That means Chinese companies may need to wait up to five years to launch a domestic IPO, which would prompt some to turn to Hong Kong, the accountancy firm said.

According to existing CSRC rules, Chinese companies applying for an overseas IPO must have at least 400 million yuan ($64.20 million) in net assets, plan to raise $50 million or more and must generate a minimum of 60 million yuan in annual net profit.

During the first 10 months of the year, Chinese companies raised a total of 103.4 billion yuan via listings in the mainland market, down more than 60 percent compared to the whole of 2011, according to CSRC data.

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