The China Securities Regulatory Commission (CSRC) approved a large initial public offering by China Postal Express & Logistics yesterday.
It is the latest setback to CSRC chairman Guo Shuqing's efforts to support the bearish market by keeping a lid on inflows of fresh equity.
Now that it has got the go-ahead from the regulator's IPO review committee, China Postal Express, spun off as an independent unit from China Post Group in June 2010, will seek to raise 9.97 billion yuan (HK$12.26 billion) by floating four billion shares.
It will use the IPO proceeds to expand its infrastructure network.
This is likely to become the mainland's largest IPO this year, though the fund-raising has been surrounded by a swirl of suspicion.
The mainland's listing rules allow IPOs by firms only if they have been operating for at least three years.
China Postal Express received special approval from the State Council to raise funds on the stock market although it has operated as an independent legal entity for less than two years, the official Shanghai Securities News reported.
Guo, who took the helm of the CSRC late last year, has tried to curb the supply of equities to the sluggish market, insisting only quality firms would be welcome on the bourses.
Approval for the China Postal Express IPO shows Guo and the CSRC still have to yield to decisions taken by higher-level authorities.
China Postal Express, which will become the mainland's first express service provider to list its shares, has lagged behind its domestic peers in the past three years.
Last year, the firm's business grew 16.4 per cent from the year before, while the national express sector recorded 31.9 per cent growth.
The company reported a net profit of 901 million yuan on revenue of 25.89 billion yuan last year.
Privately owned express service companies such as S.F. Express have been challenging the state-owned China Postal Express, which is held back by its rigid bureaucracy.
Beijing hopes the IPO will help China Postal Express vie for a bigger share of the fast-growing market.
'The IPO might be embarrassing to chairman Guo, since he was seen as a regulator resolutely seeking to protect investors' interests,' said West China Securities trader Wei Wei.
'But it could be just an exceptional case, and the CSRC may remain tough in its IPO reviews.'
The regulator recently gave the go-ahead only to small IPOs, and it has unveiled a new rule to cap offering prices to avoid a huge liquidity drain from existing counters.