China’s regulators have unblocked the path for companies to list overseas, reopening the avenue of fundraising after a 20-month obstruction to enable businesses to recapitalise for growth in the post-Covid period. With effect from March 31, the China Securities Regulatory Commission (CSRC) will have the mandate to vet applications for offshore listings, including in Hong Kong and the United States, according to a statement released late Friday night . Listing applicants must abide by the rules of industry regulators such as the Cyberspace Administration of China (CAC) in their disclosures of customers’ data and anything that could be construed as state secret. The CSRC will block listings that may impede state security, or those that involve companies or shareholders that have committed corruption, bribes or are under investigation. “Offshore listing is a key component of China’s capital markets opening”, the CSRC said. “The new rules reflect [China’s commitment towards] opening its capital markets and allowing firms to raise funds from international investors to share the growth story of the country”. Hong Kong clings to third place in 2022 ranking of IPO destinations The rules would end the mostly unregulated process of Chinese companies’ offshore listings by enacting clear rules, with an overseer. Chinese offshore listings trickled to a halt after the ride-hailing service Didi defied regulators’ warnings to raise US$4.4 billion in New York in July 2021. The move, described by incensed Chinese officials as a “ deliberate act of deceit ”, kicked off a regulatory crackdown on the Beijing company, ultimately forcing it to delist 11 months later from New York. Didi is now aiming to sell shares in Hong Kong . Chinese companies raised nearly US$230 million in US listings last year, less than 2 per cent of the US$12.85 billion raised in 2021, according to Refinitiv data. The loss of Chinese companies has hit the US exchanges hard, driving out Nasdaq and the New York Stock Exchange (NYSE) from the world’s top 10 IPO markets last year, according Refinitiv’s data. Nasdaq, the top IPO market of 2021, fell to 11th place last year with 88 companies raising US$5.29 billion, while NYSE dropped to 15th spot with only four listings valued at U$2.8 billion. Hong Kong’s main board ranked third, ahead of Seoul and behind Shanghai’s Star Market and the ChiNext market in Shenzhen, Refinitiv data showed. Companies that are already listed outside mainland China will not be bound by the CSRC’s new rule, although they must register with the Chinese regulator, “given a transition period”, if they want to raise additional capital, the CSRC said without specifying the period. The requirement forms part of the CSRC’s overall register for initial public offerings (IPOs), which the watchdog agency announced separately for the stock exchanges of Beijing, Shanghai and Shenzhen at the end of a public consultation period that ended on Thursday. Unlisted companies with approvals in hand have six months to kick off their IPOs, or must abide by the new rules that kick in on March 31, CSRC said. Still, “the new rule will clear up any uncertainties about how mainland companies with sensitive information can list in the US and Hong Kong,” said Tom Chan Pak-lam, the permanent honourable president of the Institute of Securities Dealers in Hong Kong, an industry body. “This is a positive move as it will encourage more new listings in Hong Kong and the US.” Tech listing reform brightens Hong Kong’s IPO market outlook in 2023 To underscore the point, the CSRC and Hong Kong’s Securities and Futures Commission (SFC) signed an accord on Friday to lay down the procedures for listings in the city. The agreement clarifies how the two regulators work together to conduct cross-boundary enforcement, supervision of intermediaries and exchange of information. “The MOU will facilitate the CSRC and the SFC in discharging their supervisory functions, jointly combating cross-boundary offences and misconduct, safeguarding the legitimate interests of investors and ensuring the steady and healthy development of both markets,” according to a joint statement by the two regulators. The new rules could pave the way for more IPOs to return to Hong Kong, which bodes well for a city that was the world’s top fundraising destination in seven of the past 13 years . The resolution of a decade-long auditing tussle between the US and China in December could also open the path for more companies to list in New York, Chan said. Four companies including the lidar maker Hesai , the online learning platform QuantaSing Group and the blank-cheque asset buyer Distoken Acquisition Corp have raised a combined US$306 million in New York this year.