The United States is raising the bar for listings, including by tightening disclosure requirements for Chinese corporations, but the number of Chinese corporations seeking initial public offerings (IPOs) on U.S. stock markets is instead increasing.
On the 26th, the South China Morning Post (SCMP) cited the China Securities Regulatory Commission (CSRC) as saying that as of this month, more than 50 Chinese mainland corporations are awaiting approval to issue shares on U.S. stock markets, adding, "Demand in the listing pipeline remains solid."
This contrasts with the weak performance of Chinese corporations' U.S. IPOs. According to an EY report, in the first half of this year only two Chinese corporations listed on U.S. stock markets: Hong Kong decarbonization technology company Baozaguoji and auto platform company Souche. The funds these corporations raised through their listings totaled $59.5 million (about 87.3 billion won), with both the number of listings and the size of offerings at the lowest levels in the past five years.
Moreover, the United States is tightening listing reviews and disclosure obligations for Chinese corporations, while China is strictly managing overseas listings through a mandatory filing system centered on national security and data security reviews. Despite the higher regulatory walls in both the United States and China, demand from Chinese corporations pushing for U.S. stock market IPOs remains firm.
SCMP pointed to the fact that U.S. stock markets, the world's largest capital market, still offer high valuations and ample liquidity. The industry views U.S. stock markets as the most suitable market for early investors to cash out equity.
Hung Hao, chief investment officer (CIO) at Hong Kong's Lotus Asset Management, said, "A U.S. stock market listing still carries high prestige," adding, "New York is the world's largest capital market, with abundant liquidity and a base of global institutional investors that other regional exchanges find hard to replace."
In particular, technology corporations such as artificial intelligence (AI), which have recently led stock markets worldwide, are known to tend to receive higher valuations in U.S. markets. Tommy Ong, managing director at consulting firm T.O.& Associates, explained, "U.S. stock markets assign relatively higher premiums to advanced technology corporations such as AI, whereas in Hong Kong, platform corporations are often evaluated as consumer-related corporations, tending to result in lower valuations."
However, some analyses say the appeal of U.S. markets for Chinese corporations is gradually weakening. In the past, Chinese technology corporations used variable interest entity (VIE) structures to raise funds overseas with relative freedom, but as U.S.-China strategic competition has intensified recently, the Chinese government has significantly strengthened reviews of overseas listings on grounds of national security and data security.
Ong noted that funds raised overseas now must also comply with Chinese authorities' regulations, assessing that "the era when capital could be freely managed through a U.S. listing, as in the past, has virtually ended."