Critical approach required for IPOs in China

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The Chinese stock exchange supervisor CSRC is urging banks that accompany a stock exchange to conduct more critical research on companies that want to issue their shares. The regulator also says it wants to distribute penalties to banks that want to bring ‘sick’ companies to the stock market. According to the watchdog, there is a lack of proper inspection at IPOs.

Yi Huiman, chairman of the CSRC, warned in a panel discussion about ‘harmful money flows’ from abroad. Companies can benefit from, for example, more advantageous interest rates by contributing money flows to other countries. According to Yi, China needs to tighten controls on these large financial flows, as they can be detrimental to”healthy market development”.

China, like the United States, has adapted the rating system for IPOs in the hope that the market will play a greater role in this. Since december, this has ensured that stock exchanges have stepped up checks at stock exchanges. As a result, a growing number of companies are abandoning their stock market plans. According to Yi, the IPO registration system is not a licence for looser controls.

The chairman expresses his concerns at a time when the global stock market is experiencing severe fluctuations, partly due to the impact of the coronavirus crisis. In addition, the Chinese government is tightening the reins on various fronts, including around stock markets. It stopped Ant Financial, a subsidiary of Alibaba earlier at the last minute. This probably had to do with critical remarks by Alibaba founder Jack Ma about the Chinese government.

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