(Yicai Global) Feb. 2 -- China plans to widen the registration-based initial public offering system to all mainland stock exchanges, according to draft rule changes the country’s securities regulator has proposed.

After almost 10 years of preparation and pilot projects, the China Securities Regulatory Commission put forward the changes yesterday and is seeking public feedback until Feb. 16.

The registration-based IPO system was first used by Shanghai’s Nasdaq-style Star Market in 2019 and was later applied to Shenzhen’s ChiNext growth enterprise board and the Beijing Stock Exchange. The reforms set out yesterday would extend that to the main boards of the Shanghai and Shenzhen stock markets, entirely doing away with the approval-based IPO system overseen by the CSRC.

The reform will bring new growth momentum to the development of China’s capital market and attract more funds, according to Tang Zhehui, auditing services partner at EY China.

“A whole-market registration system will bring efficient and convenient domestic fund-raising opportunities for outstanding Chinese firms,” Tang said. “Based on overseas experience, the best local firms will choose to go public on local exchanges under the new system.”

Once registration-based IPOs encompass the entire market, the various financial thresholds set by the old system would be replaced by stricter and more extensive public information disclosure, leaving IPO pricing to the market rather than the CSRC.

The new system should also save time, shortening or even ending the long queues of companies awaiting IPO approval. As of Jan. 19, 295 applications to float on the main boards in Shanghai and Shenzhen were pending review and many more firms were in IPO tutoring, according to CSRC data.

Following the reform, the Shanghai and Shenzhen main boards would be positioned even more as markets for large-cap blue-chip companies, differentiating them from the other share trading venues, Yicai Global learned. For example, the new system would still require firms that apply to go public on a main board to have made a net profit in the previous year, as companies listed on these boards are mainly large-cap blue chips, a CSRC official said.

Even though the CSRC will no longer directly review IPOs, if applicants are suspected of major violations, regulatory measures, including listing delays and even cancelations, will be swiftly taken, the watchdog noted. 

Editors: Tang Shihua, Martin Kadiev