Date
28 July 2017
A registration system for initial public offerings could be in place as early as March. It will replace the approval-based regime. Photo: Reuters
A registration system for initial public offerings could be in place as early as March. It will replace the approval-based regime. Photo: Reuters

China paves way for March rollout of market-based IPO system

China has cleared the way for a registration system for initial public offerings as early as March.

Lawmakers approved a resolution that would allow changes to he securities law, switching IPOs from an approval system, Bloomberg reports.

At present, the government relies on the China Securities Regulatory Commission (CSRC) to act as a gatekeeper for offerings, with a seven-person listing review committee examining each application.

Under a registration system, questions of IPO supply and timing would be left to companies and the market, rather than regulators.

The new regime would “thoroughly” change the investment banking operations of China’s brokerages by giving them more power to determine IPO pricing and by boosting their business volumes, Huatai Securities Co. said earlier this month.

Even after President Xi Jinping pledged in November 2013 to give markets a “decisive” role in the world’s second-biggest economy, the CSRC still pressures companies planning IPOs to price them at below-average valuations in an effort to protect small investors.

The perception that IPOs are risk-free has encouraged some investors to use borrowed money, exposing them to deeper losses once prices stop climbing, according to Shenwan Hongyuan Group Co.

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