Beijing unveils plan to lure big tech stock listings back home

Bloomberg

China took a major step toward seeing Alibaba Group Holding Ltd., Baidu Inc. and others list in its domestic market, announcing a trial programme that would allow the technology giants to see their shares bought and sold in the world’s most populous country.
The State Council unveiled the plans, less than a month after the idea was first made public—underscoring how keen authorities are to see foreign-listed firms come home.
A pilot of Chinese depositary receipts would apply to companies that went public overseas and have a market value of more than 200 billion yuan ($32 billion). Firms can use corporate structures that aren’t permitted on the mainland, and monies raised can be moved offshore. Some private companies will also find it easier to list shares.
While China has been a breeding ground for some of the world’s fastest-growing and highest valued tech businesses, companies such as e-commerce giant Alibaba and search engine firm Baidu have headed offshore, leaving the local market reliant on state-run industries.
The CDR trial and easier listing rules may change that: analysts at China International Capital Corp. estimate that 35 foreign-listed and private companies may qualify, with prospects that they’ll raise as much as 1.5 trillion yuan in financing.
“There’s a strong desire to see local champions, these technology companies, come back onshore—and CDRs is one way of doing this,”
said David Smith, Asia head of corporate governance at Aberdeen Standard Investments. Regulators first mooted the prospect of a CDR programme at the March meeting of China’s rubber-stamp national legislature.
The State Council didn’t say in the statement when the trial programme would start.
The news could have global implications. While the likes of Alibaba and Tencent Holdings Ltd. have headed to New York and Hong Kong, respectively, the prospect of at least a secondary listing in the world’s second-biggest equity market could significantly boost their valuations and set an example for other companies. And Hong Kong Exchanges & Clearing Ltd. stock suffered its worst month in more than a year in March, partly due to the increased threat from exchanges in Shanghai and Shenzhen.
“High-tech and other innovative enterprises may, in light of the new CDR regime and ongoing competition between onshore and offshore equity exchanges, be reconsidering their IPO plans,” said John Xu, a Shanghai-based at the law firm Linklaters LLP. For example, a dual listing in China and an offshore market may now be realistic, he said.
While no companies have said they will take part in the trial, the chiefs of several firms have previously expressed interest.