China securities body seeks talks with US SEC on overseas IPOs

Beijing

CHINA'S securities regulator called for talks with its American counterpart after the US Securities and Exchange Commission (SEC) halted the initial public offerings (IPOs) of Chinese companies.

The China Securities Regulatory Commission (CSRC) is seeking to step up communication with the SEC to find a suitable resolution, it said in a statement on Sunday, after the US regulator said it would suspend any Chinese IPOs until companies improved their risk disclosures. The Chinese watchdog called for mutual respect and collaboration on the issue.

In response to Beijing's clampdown on private industry, SEC chair Gary Gensler asked staff to seek additional disclosures from Chinese firms before signing off on their registration statements to sell stock. China had earlier proposed new rules requiring virtually all companies wanting to list in a foreign country to undergo a cybersecurity review, a move that would vastly increase oversight over its private enterprises. That tighter grip has thrown a wrench into the listing plans of many Chinese startups, which have flocked to the US for its deeper capital markets, more streamlined listing processes and broader investor base.

"I believe such disclosures are crucial to informed investment decision-making and are at the heart of the SEC's mandate to protect investors in US capital markets," Mr Gensler said in a Friday statement.

China's crackdown, including banning a swath of private education companies from making profits, has triggered a dramatic selloff in shares as investors reassess how far the government will go in tightening its grip on the economy. Losses in Chinese tech and education stocks have surpassed US$1 trillion since February.

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The crackdown on overseas listings comes after Didi Global Inc pushed ahead to list in the US, despite reservations from Beijing over the ride-hailing giant's data security, Bloomberg News previously reported. Days after Didi's debut, Chinese regulators announced a probe into the firm and removed its apps from Chinese mobile stores, driving a sell-off in the tech giant's shares. The losses for American investors have fuelled calls that the SEC increase oversight of Chinese IPOs.

There are roughly 70 companies from greater China in the pipeline to go public in the US, the data compiled by Bloomberg shows. Some of them are already being deterred by tighter scrutiny from Beijing. Daojia, a home-services platform backed by KKR & Co, and on-demand logistics firm Lalamove are among startups that have paused their plans to go public or are considering non-US listings, people with knowledge of the matter have said.

Another victim of the crackdown is Chinese bike-sharing giant Hello Inc, which said last week that it had formally scrapped plans for a US IPO. Hello is backed by Chinese tech mogul Jack Ma's Ant Group Inc.

China has all along adopted an open-minded approach to listing locations, the CSRC said, adding that the current scrutiny over certain industries is aimed at coordinating development and safety. The securities watchdog will carry out close communication with relevant departments to further improve transparency and predictability of policies.

In its statement, the CSRC also reiterated a pledge to open up the country's financial industry and said that it sees the prospects for Chinese capital markets as predictable, sustainable and healthy. BLOOMBERG