China to still allow IPOs in the U.S., securities regulator CSRC says

A vehicle from the electric car maker NIO stands outside the New York Stock Exchange (NYSE) in New York City on September 12, 2018.

Drew Angerer | Getty Images News | Getty Images

China will continue to allow Chinese companies to go public in the US as long as they meet listing requirements, China’s securities regulator told brokers late Wednesday, according to a source familiar with the matter.

A number of regulatory measures in recent weeks have heightened investor concerns that Beijing is trying to block foreign capital flows into Chinese assets.

Cross-border listing can also be done using the floating rate structure, the source said, citing the regulator. It refers to a legal structure that allows international investors to access shares of Chinese companies in the United States

The regulator recognized that the structure is an important way for companies to attract foreign capital, but said it needed to be adjusted if there were national security concerns, the source said, requesting anonymity due to the sensitivity of the matter.

Vice chairman of China’s Securities Commission, Fang Xinghai, made a point of speaking during a virtual meeting with major investment banks on Wednesday, the source said. This was followed by days of heavy selling of Chinese stocks amid fears of increased regulatory crackdown by Beijing.

Bloomberg first reported the news from the meeting.

The Securities Commission stopped before making an official public statement. The Commission did not immediately respond to a CNBC request for comment.

Chinese stocks listed in Asia and the US – including big names like Alibaba and Tencent – slumped in recent days as Chinese authorities tightened controls on technology companies over monopoly practices and data security.

A policy paper circulated widely on Friday called for Chinese tutoring companies to become nonprofits after school, which caused Hong Kong and US stocks to plummet double digits

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The policy explicitly forbade notifying companies to raise money on the stock exchange or to have foreign investors, particularly through the legal structure of variable rate companies that give international investors access to Chinese stocks.

The speed and breadth of politics surprised many. Goldman Sachs downgraded Chinese education stocks on Monday as the post-school tutoring market was expected to “shrink significantly” – to less than a quarter of its current $ 106 billion.

However, Fang of the Securities Commission said the policy was aimed at easing the burden on parents – rather than discouraging foreign investment – and would give education companies as much time as needed to restructure, according to the source.

The education policy in question was issued by the State Council – China’s highest executive body – and the Central Committee of the Chinese Communist Party.

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