Agreement on IPO reform path unanimous
More time needed for move to registration-based system
All sides have expressed agreement about the reform path for China’s IPO system, despite different views on the timetable for its rollout, a senior official from China’s top legislature said on Monday.
“The move to a registrationbased listing system is only part of the important content of the amendments to our security laws,” Uzhitu, vice chairman of the Financial and Economic Affairs Committee of the 12th National People’s Congress (NPC), told a press conference on the sidelines of the ongoing two sessions on Monday.
“Other content includes the construction of a multi-tier capital market system, regulation of the stock market and protection of investors’ legal interests,” he noted.
A registration-based IPO system is different from the current approval-based approach. It involves a lower threshold and simplifies the listing process, while emphasizing post-listing information disclosure, which is a more market-oriented arrangement.
The current approval-based system has strict financial requirements and involves stringent reviews by the regulator, the China Securities Regulatory Commission (CSRC).
On February 23, Liu Shiyu, chairman of the CSRC, proposed delaying the deadline for the government to authorize the registration-based IPO mechanism, as some aspects of the current capital market are not yet matched with the system, which needs to be further explored and improved, the Xinhua News Agency reported.
After a review by the Standing Committee of the 12th NPC, it was decided to delay the deadline for another two years, until February 29, 2020.
Yang Delong, chief economist at Shenzhen-based First Seafront Fund Management Co, told the Global Times on Monday that the decision shows the regulator’s desire to protect the market, which should be reassuring for investors, and is conducive for the A-share market’s momentum.
“Over two decades of development, China’s capital market has become more mature, but there is still a big gap to the maturity required for a registration-based IPO system,” Yang noted, adding that if the system were to start now, some weak firms or ones that are operating improperly might squeeze in and harm the interests of investors.
Besides, the information disclosure system and delisting rules in the A-share market also need to be further improved, he said.
The IPO reform plan has attracted much public debate since December 2015, when the Standing Committee of the 12th NPC authorized the State Council, China’s cabinet, to adjust the rules to allow the listing system to be changed from an approval-based to a registration-based one. The change was originally scheduled for February 28 this year.
“As far as I’m concerned, there is little chance for the new system to be implemented [so soon]. It will take at least five years from now,” said Li Donglin, a professor at East China Normal University.
Li pointed out that the extension of the deadline offers a transitional period to gradually tackle issues in various areas, such as trust and asset management products.