Top Official Says Beijing to Continue Backing Offshore Listings by Chinese Firms

China will continue to support all types of companies to seek offshore listings, said China's vice premier at a high-profile meeting on Wednesday.

At a conference held by the financial stability committee of the State Council, China's cabinet, Liu He revealed that regulators from Beijing and Washington have kept their good communication going and achieved "positive" results, although he didn't specify.

The two sides are now working on a concrete cooperative proposal, said Liu, who presided over the meeting.

His remarks come after Chinese companies face a months-long freeze in US listings due to heightened regulatory scrutiny and mounting political tensions between the two countries.

Chinese firms raised USD 12.8 billion from US exchanges in the first seven months of last year, but the funding dried up when the initial public offering of Didi Global on Nasdaq in late June triggered a severe regulatory backlash from Beijing.

The debut also sparked wide-ranging repercussions for firms planning US stock offerings, compounding the difficulty many applicants already are facing, such as the requirement to open their books to US auditors, a long-standing sticking point between both countries' regulators.

The stakes were higher when the Securities and Exchange Commission in early March added five Chinese companies to a provisional list of issuers identified under the Holding Foreign Companies Accountable Act (HFCAA), meaning these firms would face delisting risks if they did not meet standards set by the SEC.

Following the Didi fiasco, China has exercised tighter scrutiny for all offshore listings, including those in Hong Kong, requiring that firms planning stock debuts be subject to national security review.

Specifically, all platform companies that collect data on more than 1 million users need to pass the review before they are allowed to list overseas, according to China's Data Security Law, which took effect from September 2021.

Authorities need to improve their plans in a market-oriented, rules-based and international manner in fulfilling their responsibility to govern the platform economy, Liu told the conference.

He added that Chinese regulators need to exercise proper, transparent and predictable oversight and steadily facilitate and finalize the rectification of mega platform companies in a timely fashion.

Measures also need to be taken to foster the stable and healthy development of the platform economy so as to enhance its global competitiveness, Liu explained.

The vice premier, who is also China's top trade negotiator with the US, urged authorities to set up the mechanisms for identifying situations where to give the greenlight or raise a red flag when screening an offshore IPO application.

Liu's words came at a time when offshore-listed Chinese stocks, in New York and Hong Kong, tumbled in recent weeks due to a series of factors including China's economic outlook, a growing Covid-19 outbreak at home, increased US scrutiny of US-listed Chinese firms, and the Russian-Ukraine conflict.

Shares of Hong Kong-listed Chinese companies rallied on news of the State Council meeting on Wednesday. GDS, a data service supplier, surged 36%, Li Auto jumped 30%, Bilibili leaped 26%, JD.com rocketed 22%, New Oriental and Xpeng soared 20%, NIO shot up 15%, NetEase grew 14%, Baidu and Sina Weibo rose 13%, and Alibaba Group advanced 12%.

Liu and other senior officials also discussed Hong Kong's capital market, mitigation of risks in China's real estate sector, among other issues.