(Yicai) July 7 -- Twelve firms seeking to go public in China have been randomly selected by regulators for on‑site inspections, triple last year’s total, signaling that the new registration‑based system for initial public offerings will entail stringent supervision even as the IPO pipeline swells.

Of the 12 companies selected, 11 had their IPO applications accepted in June and one in May, the Securities Association of China announced on July 3. Three have advanced to the inquiry stage, while the rest are still at the acceptance stage.

Eight plan to go public on the Shanghai Stock Exchange (three on the main board and five on the bourse’s Nasdaq-style Star Market), while four aim to list on the Shenzhen Stock Exchange (three on its main board and one on the ChiNext). The firms have nine sponsoring brokerages, including heavyweights like Citic Securities and China International Capital Corporation, or CICC. 

The uptick in spot checks this time round -- 12 companies compared with just two in this year’s previous round -- is fully in line with regulations, according to the authorities, and reflects the country’s burgeoning IPO pipeline. The Chinese mainland’s three major stock exchanges accepted nearly twice as many filings last month as they did in the whole of last year.

The Beijing, Shanghai, and Shenzhen bourses accepted 150 IPO filings in June, compared with 77 in 2024. Ninety-two applications were approved in the last four working days of the month, with 41 accepted on June 30 alone. Adding the 27 filings accepted from January through May brings the cumulative total for the first half of this year to 177.

The spike in on‑site inspections is directly linked to the surge in IPO applications from January to June, said Wu Chao, the sponsor representative in the investment banking division at Minsheng Securities.

It reflects a balancing act between stricter supervision and market openness, according to Tian Lihui, dean of the Institute of Financial Development at Nankai University. The flood of applications in the past two months put pressure on regulators, while spot checks are a way for them to show that the registration-based system is not a “free pass,” but a “wide entry, tight oversight” model, Tian said.

Judging from last year, of the four companies selected for spot checks, two had their reviews terminated, one has been stuck in the inquiry phase for more than a year, and one suspended the review due to updated financial reporting.

“In the future, whether a company can go public or not will depend on whether it can stand up to close scrutiny, not just on how well it presents itself,” said Tian. “For investors, this is the litmus test for separating the wheat from the chaff. And for the capital markets, this marks an important step towards greater maturity.”

Editor: Kim Taylor