China has long adopted the approval-based initial public offering (IPO) system. The upcoming new policy will change the regulatory model of China’s securities market to a large extent.
In February 2023, China’s State Council approved the “Overall Implementation Plan for the Full Implementation of the Stock Issuance Registration System” (全面实行股票发行注册制总体实施方案, hereinafter the “Overall Plan”). On this basis, the China Securities Regulatory Commission (CSRC) released draft rules and regulations of the system, including the “Administrative Measures for Initial Public Offering Stock Registration” (首次公开发行股票注册管理办法) to solicit public opinion.
China has long adopted the approval-based IPO system, meaning companies are required to obtain authorization from the securities regulatory authority in order to go public. The company can only go public after the approval. Therefore, the regulatory authority plays a significant role in the company listing. In contrast, many countries, such as the United States, have adopted a registration-based system, which means regulatory authorities will set a standard for company listing. Companies can go public if they are up to the standard.
Under the approval-based system, China’s regulatory authority plays the role of goalkeeper, meaning more supervision occurs when companies go public. Under the registration-based system, supervision will occur more after a company goes public.
This change will significantly impact the regulation and investment approaches of China’s securities market.
Cover Photo by Zean Wu on Unsplash
Contributors: CJO Staff Contributors Team
