Chinese companies have shown a strong desire to list on U.S. stock exchanges, but the process has become increasingly complex, according to Kobe Ge, the head of China at the New York Stock Exchange. Despite the challenges posed by the COVID-19 pandemic and regulatory uncertainty, there is still significant interest from Chinese businesses to list in the U.S. However, they are now faced with unfamiliar and more challenging procedures. This article explores the evolving landscape of Chinese IPOs on U.S. stock exchanges and the factors contributing to the complexity.
In the past, listing in the U.S. was relatively easy for Chinese companies, with IPO completion taking around four-and-a-half to five months. However, due to new measures implemented by the China Securities Regulatory Commission on March 31, companies now need to allocate a longer preparation period of up to 12 months. The new rules require domestic companies seeking to list in the U.S. or Hong Kong to comply with national security measures and the personal data protection law before going public overseas. These additional requirements have added layers of complexity to the IPO process.
The rising political tensions between the United States and China have further contributed to the complexity of Chinese IPOs. Uncertainty among Chinese companies and investors has emerged due to the executive order signed by U.S. President Joe Biden in August. The order aims to regulate U.S. investments and expertise that support China’s development of sensitive technology. The specific details of the order are yet to be released, causing investors to adopt a wait-and-see approach. The anticipation of potential future restrictions has led to cautiousness in the market.
Despite the challenges and uncertainties, Kobe Ge remains optimistic about the rebound of Chinese listings in overseas markets. He emphasizes the significance of Chinese companies focusing on building strong businesses to weather the storm. Ge compares the situation to a ship at sea, highlighting the need to pay attention to both external factors and internal fortification. Investors are increasingly seeking mature business models and predictable profits instead of just high growth. Therefore, it is crucial for Chinese companies to prioritize building a sturdy foundation for long-term success.
Looking ahead, Ge and Robert H. McCooey, Jr., a vice chairman at Nasdaq, express positive views on the future of Chinese IPOs on U.S. stock exchanges. Ge predicts an improvement in the overall U.S. IPO market between April and October next year. McCooey echoes this sentiment, highlighting a strong pipeline of Chinese companies intending to list on the exchange. The new filing process by the China Securities Regulatory Commission allows a wider audience to monitor companies in the IPO process, fostering transparency and market awareness.
As of January 2023, there were 252 Chinese companies listed on U.S. exchanges, including the NYSE, Nasdaq, and NYSE American, with a total market capitalization of $1.03 trillion, according to official data. The increasing number of Chinese companies seeking listings on U.S. stock exchanges demonstrates their appetite to tap into the international market.
The process of Chinese IPOs on U.S. stock exchanges has become more complex, requiring a longer preparation period and compliance with additional regulations. Political tensions between the United States and China have added uncertainties, causing investors to exercise caution. However, opportunities for Chinese companies to list in the U.S. remain attractive, particularly if they prioritize building strong businesses with steady profitability. Transparency and market awareness are increasing with the new filing process, indicating a positive future outlook. The evolving landscape of Chinese IPOs reflects the global ambitions of Chinese companies and their desire to access international capital markets.