China’s securities regulator called for talks with its US 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 yesterday, after the US regulator said it would suspend Chinese IPOs until such companies improved their risk disclosures.
The Chinese watchdog called for mutual respect and collaboration on the issue.
SEC Chairman Gary Gensler said the Chinese government’s recent actions, including its announcement of enhanced security reviews of firms seeking foreign listings, are “relevant to US investors.”
He said he has asked SEC staff to seek additional disclosures from Chinese firms before signing off their registration statements to sell stock.
“I believe such disclosures are crucial to informed investment decisionmaking and are at the heart of the SEC’s mandate to protect investors in US capital markets,” Gensler said in a statement on Friday.
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.
The SEC has faced intense pressure from Washington to increase scrutiny of Chinese companies as shares of Didi Global Inc (滴滴) have plunged following its US IPO last month.
Right after the listing, China announced it was conducting a security review and restricting the ride-sharing company from adding new customers.
US lawmakers have urged the SEC to investigate Didi to find out whether the company knew what steps China was considering and if it failed to disclose those risks to US investors.
Chinese companies listing in New York have been a lucrative source of revenue for Wall Street banks that underwrite the deals. This year is already the second-best on record for such listings, with companies raising at least US$15.7 billion — more than the entire amount last year, according to data compiled by Bloomberg.
However, China proposed new rules earlier this month requiring that nearly all companies seeking to list overseas undergo a cybersecurity review, a move that would significantly enhance its oversight.
That tighter grip has thrown a wrench into the listing plans of many Chinese start-ups, which have flocked to the US for its deeper capital markets, more streamlined listing processes and broader investor base.
There are about 70 companies from China in the pipeline to go public in the US, data compiled by Bloomberg show, but some of them are being deterred by tighter scrutiny from Beijing.
China has always adopted an open-minded approach to listing locations, the CSRC said yesterday, adding that the scrutiny over certain industries is aimed at coordinating development and safety.
The CSRC will attempt to improve transparency of its policies, it said, while adding that it sees the prospects for Chinese capital markets as predictable, sustainable and healthy.
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