China’s New Offshore Listing Regulations Revive Hope for IPOs

China’s failing IPOs are set to get a boost in 2022 after Beijing is expected to unveil new rules for Chinese companies’ offshore listings, giving much needed clarity for confused investors.

Chinese regulators are considering new rules for the evaluation of variable interest entity (VIE) structure, which is used by Chinese companies to attract foreign investors by setting up an offshore company.

VIE structure has helped Chinese businesses to become available in the U.S. stock markets in the past 20 years.

The regulators consider new rules after IPOs in Hong Kong have seen a drop in 2021. The city, which accounts for 16% of Asia-Pacific listings, has been home to $26.7 billion worth of IPOs so far this year, almost 20% short from 2020’s $31.8 billion.

Analysts and investors hope that new rules will bring transparency to IPO prospects and encourage them to turn to public markets, particularly technology and media companies, which have had to deal with regulatory crackdown all year.

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