U.S. News

China May Restrict Red Chip A-share Offers


China may set restrictions for domestic stock offers by Chinese firms incorporated abroad -- so-called "red chips" -- including a requirement of at least 1 billion yuan (US$130 million) in annual net profit, the official Securities Times said on Thursday.

Red-chip firms -- incorporated and listed in Hong Kong but controlled by mainland Chinese shareholders -- will be encouraged to issue yuan-denominated A shares instead of using other forms of offers, such as China Depository Receipts, the newspaper said.

The Shanghai Securities News on Thursday quoted China Mobile Chief Executive Officer Wang Jianzhou as saying the red-chip firm, the world's largest wireless carrier, was preparing to launch an A-share offer, although it did not have a timetable because China had yet to work out related policies.

Previous media reports have said that other large-cap red-chip shares such as Lenovo Group and oil company CNOOC were considering similar moves.

"The return of red chips to the domestic market will mainly be open to major corporations and will initially not be open small companies," the Securities Times said, citing unnamed stock regulators.

Red-chip companies whose parent firms or units have already listed on the domestic Shanghai or Shenzhen stock exchanges would also be excluded for the time being, the Securities Times said.

State media have reported that securities regulators are drafting rules to let red chips float shares domestically as early as the second half of this year.

Such domestic listings would help China to expand its stock markets into a major fund-raising source for companies -- a key goal of Beijing's economic policy.

The regulations may eventually also allow foreign-owned companies to list in China as well, the media reports said.