Days after go-ahead for VIE structures, Beijing releases ‘negative list’ to tighten grip on overseas IPOs by strategically sensitive firms
- Firms in industries on the list will have to obtain a waiver from regulators before proceeding with IPOs overseas
- The negative list ‘will play a bigger role than the CSRC’s registration system’ in companies’ listing plans, Shanghai lawyer says
Beijing will step up the review of overseas fundraising activity by companies in certain industries that are off-limits to foreign investment.
Late on Monday, the National Development and Reform Commission (NDRC) and the ministry of commerce, China’s top economic policymaking institutions, published a detailed operating guide and a “negative” list that will govern foreign investment. Firms in industries on the list will have to obtain a waiver from regulators before proceeding with initial public offerings (IPOs) overseas. The list will take effect on January 1, 2022.
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“The negative list clarifies that some of the VIE businesses are unlikely to be allowed to raise funds offshore, as China takes measures to ensure national and data security,” said Ding Haifeng, a consultant at Shanghai-based financial advisory firm Integrity. “All in all, Beijing will still let companies launch IPOs outside the mainland, but will still stop some of the companies in significant sectors from doing so.”
The CSRC’s intervention came after an investigation into ride-hailing company Didi Global, which used a VIE structure to complete a US$4.4 billion IPO in New York in late June. The Didi IPO triggered a data security investigation by the Cyberspace Administration of China, which recently culminated with the firm announcing plans to delist in the US and list in Hong Kong.