Beijing fast tracks foreign-listed Chinese tech firms’ A-share flotation with CDR system launch
Guidelines published by Chinese regulator on March 22 take immediate effect after State Council endorsement
Beijing formally offered a fast track for overseas funded Chinese technology behemoths to raise funds on mainland stock exchanges on Friday, after the State Council endorsed the Chinese Depository Receipt (CDR) mechanism at lightning speed.
The State Council said qualified innovative companies with valuations of no less than 20 billion yuan (US$3.2 billion) and annual revenue of at least 3 billion yuan could embark on the CDR system to either float additional shares, or launch initial public offerings on the A-share market.
The guidelines on CDR, which were prepared by the China Securities Regulatory Commission (CSRC), were approved by the Cabinet on March 22 and published on Friday evening, less than a month after the regulator announced its plan to do so.
Under the CDR system, part of a company’s shares are transferred to a custodian bank, which sells them on an exchange abroad.
“The pace at which approval was granted for this deregulatory plan has rarely been seen in China’s capital markets before,” said Cao Hua, a partner at private equity group Unity Asset Management. “A handful of technology giants are expected to land on the mainland market very soon.”
About 30 “unicorns” – unlisted companies valued at more than US$1 billion – and Chinese internet giants that are already traded on equity markets abroad will be eligible for issuing CDR shares.