China Mulls Stricter IPO Regulations For Shanghai’s STAR Board

Companies looking to file publicly on Shanghai’s STAR board could face stricter rules by Chinese regulators that would include requiring businesses to prove their technological chops.

The new regulations being developed by the China Securities Regulatory Commission (CSRC), which could be announced as early as April, would likely highlight technology and innovation, Bloomberg reported on Wednesday (March 10). The new mandates will also likely step up oversight on a company’s financial health as a way to raise the bar on filings while also offering better protection to investors, the sources said.

The stricter regulations are not for any particular sector, but would effectively make it more difficult for technology companies to list on STAR. Jack Ma’s Ant Group, for example, would be subjected to closer scrutiny of its listing application, the sources told Bloomberg.

With the tighter rules being discussed among mainland bankers, several firms have now been urged to remove their IPO plans from the STAR board, per the report. Some of those may instead choose to list on Shenzhen’s Chinext board.

CSRC officials are hoping the new rules will help prevent inferior businesses with inflated valuations from publicly listing. IPO oversight has been slipshod and investors have been hungry for tech shares, which has led to some risky listings. China is also looking to develop a “deviation correction” solution, per the country’s 14th five-year plan that establishes policies from 2021 to 2025, Bloomberg reported.

Chinese regulators are also cracking down on FinTechs in general and working to overhaul the industry, with the sudden suspension of Ant’s $35 billion dual listings paving the way for new FinTech mandates. The new regulations could mean further obstacles for Ant’s quest to go public. 

The shifting ecosystem for FinTechs and technology companies means new competition rules and regulations in both the U.S. and China, the world’s biggest economies. IPOs in China raised an estimated $11.7 billion last year from 30 IPOs.