Observers expect the use of depository receipts in China to facilitate equity financing by tech enterprises.
The State Council approved and issued the China Securities Regulatory Commission’s “Several Opinions on Undertaking Trials for Innovative Enterprises Issuing Shares or Depository Receipts Domestically” (关于开展创新企业境内发行股票或存托凭证试点的若干意见) on 30 March, paving the way for the increased use of Chinese depository receipts for equity financing purposes.
The Opinions will allow some tech companies or enterprises in strategic emerging industries to perform listing via the issuance of either shares or depository receipts, with a focus on sectors including big data, cloud computing, artificial intelligence, software, integrated circuits, high-end manufacturing and bio-tech.
Under the Opinions certain red chip companies will be permitted to issue depository receipts on the domestic capital market in order to achieve listing.
“This is a sign that IPO’s, CDR’s as well as backdoor listing will become options for the listing of innovative enterprises,” said Wang Zhongmin (王忠民), vice-chair of China’s National Council for Social Security Fund, to Securities Daily. “These three channels provide the fastest, largest and most potentially valuable securitisation scene for new supply content.”
“Over the past few days policies in relation to Chinese Depository Receipts have been released, which clearly indicates that China supports the new economy, and that reforms of the capital market system are accelerating,” said Wang Guangyu (王广宇), chair of the China Academy of New Supply-side Economics, at the China New Supply Side Economist 50 Forum First Quarter Summit and Monetary Finance Roundtable.
“China’s multi-tier capital market needs to seize upon the key issue of the quality of listing companies…enabling a greater number of innovative enterprises to list and enabling unicorn enterprises to return to the A-share market is an extremely important change.
“Only by having these kinds of enterprises to return to the A-share market will it be possible for the market’s vitality and value to continue over the long-term.”