(Yicai) March 11 -- China should make it easier for domestic firms to list offshore, preferably in Hong Kong, the head of the special administrative region’s securities watchdog suggested at the National People’s Congress along with other proposals to improve non-mainland investment channels. 

The system for domestic businesses to apply for offshore listings should be enhanced and they should be encouraged to pursue a dual listing in Hong Hong, according to Tim Lui, chairman of the Securities and Futures Commission and an NPC deputy. Dual listings refer to primary listings on two or more bourses.

China brought out new rules for overseas initial public offerings a year ago. Since then, companies have become more enthusiastic about listing offshore, and nearly 60 percent have chosen Hong Kong. But the process is slow and firms have low expectations of approval, according to Lui.

In January, it took almost 150 days for mainland-based firms to complete their IPO filings in the SAR, down from more than 170 days in the prior month. In November the average was 104 days.

Lui suggested that the authorities should further streamline the filing procedure, provide clearer guidance to the market, and make the review schedule more predictable.

The authorities should introduce policies to encourage businesses looking to list in the United States and Switzerland to apply for a dual listing in Hong Kong, as that could help reduce any risks from geopolitical factors and also bring new opportunities to the city’s primary market, Lui said.

Due to geopolitical tensions and interest rate hikes in Europe and the US, Hong Kong only had 68 IPOs last year, which raised a total of about HKD46 billion (USD5.9 billion) between them, less than half the amount raised in 2022, with the local IPO market slipping to sixth place globally.

Besides IPO-hopefuls, China could focus on investors during the 10th anniversary year of the Stock Connect program linking the mainland and Hong Kong markets. Regulators could lower the entry barriers and enhance tax policies to make the mechanism more attractive to investors, Lui said.

The mainland’s retail investors need to have at least CNY500,000 (USD69,600) of assets in their accounts to participate in the Stock Connect. Lui suggested slashing that to CNY100,000.

Moreover, individual investors need to pay 20 percent tax on dividends and interest from investments in stocks traded on the Hong Kong Stock Exchange through the Stock Connect. Lui suggested that the tax policy on dividends should be aligned with that of the mainland market, as individuals who hold so-called A-shares for more than a year do not need to pay such tax.

China should also drive policy breakthroughs in the Wealth Management Connect program in the Guangdong-Hong Kong-Macao Greater Bay Area to allow brokerages to offer cross-border investment advisory services, Lui said.

Editor: Emmi Laine