(Yicai Global) Aug. 2 -- China’s securities regulator wants greater cooperation with its US counterpart after authorities in the United States tightened disclosure for Chinese businesses wanting to list on the country’s stock exchanges.

The China Securities Regulatory Commission said on its website yesterday that the two sides should continue to “uphold the spirit of mutual respect,” strengthen communication on regulatory issues, find proper solutions, and create a good policy expectation and institutional environment for the market.

The CSRC’s call comes after Gary Gensler, chairman of the US Securities and Exchange Commission, said in a statement on July 30 that Chinese firms looking to go public in the US must further strengthen information disclosure and divulge related risks.

“We have always been open to companies’ choice of listing places and support them to choose both international and domestic markets in accordance with laws and regulations,” the CSRC said. “No matter where a firm is listed, it should comply with laws, regulations and supervision requirements of the places where they list and operate.”

The SEC's statement described the risks of Chinese companies going public through variable interest entities, demanding that issuers state clearly and prominently in IPO prospectuses that investors are not buying shares of a China-based business but are actually acquiring stock in a shell company that has service agreements with the Chinese business.

Chinese firms will also have to provide detailed financial information so that investors fully understand the financial relationship between the VIE and the issuer, the SEC said. The two should disclose whether they secured approval from Chinese authorities to list on US exchanges, the statement added.

Better Oversight

On July 30, the Central Political Bureau of the Communist Party of China called for the regulatory system for companies listed abroad to be improved. The authorities are currently overseeing the relevant sectors with the aim of coordinating development and safety and promoting the sustainable and healthy development of market players, the CSRC said yesterday.

In the process of formulating and implementing the system, the CSRC will communicate closely with relevant departments to further coordinate the relationship between investors, businesses and regulators, and further improve the transparency and predictability of policy measures.

US regulators have put forward a series of new requirements for the listing of Chinese companies, and China, as a place of operation, is also steadily improving relevant systems, including the capital market system, Guan Tao, global chief economist at BOC International China, told Yicai Global.

Regulators on both sides have strengthened communication and cooperation, which will help companies make better use of the two markets and resources, and better protect investors’ legitimate rights and interests and promote closer ties between the financial markets of both sides, he said.

China will unwaveringly promote its basic state policy of reform and opening up, and increase the financial sector’s opening to the outside world, the CSRC added, saying  it will continue to introduce more pragmatic opening up initiatives to promote the high-quality development of the country’s capital market.

The attitude of Chinese policymakers to fortify the opening up of the entire financial market has not changed, said Wang Han, chief economist at Industrial Securities. Judging from the recent reform and opening up of China’s capital market, opening efforts are continuing to increase both for foreign buyers and sellers, he said.

Editor: Tom Litting