(Yicai Global) April 13 -- More and more Chinese companies plan to issue global depositary receipts in Europe as revised stock connect rules have opened up the link between the Chinese and European capital markets, according to Tim Wang, co-managing partner at British law firm Clifford Chance.

Since the Shanghai and Shenzhen stock exchanges brought in the revised rules on March 25, “many outstanding Chinese-funded firms listed in Shanghai or Shenzhen have told us of their intention to issue GDRs in Europe, and many others are already actively engaged in preparation,” Wang told Yicai Global.

The China Securities and Regulatory Commission issued the revised rules on Dec. 17. They expand the Shanghai-London Stock Connect scheme to cover eligible companies listed in Shenzhen, Switzerland, and Germany.

Chinese firms listed in Shenzhen or Shanghai can choose to issue GDRs in the United Kingdom, Switzerland, and Germany depending on their own financing needs, business connections with the locations, and the composition of target investors, Wang noted. Firms listed in the UK, Switzerland, and Germany can also issue Chinese depositary receipts to raise capital in Chinese markets.

The rules show that China’s capital market is open and inclusive, Wang said, adding that innovation based on balancing regulation and market demand will attract more foreign-funded firms to issue CDRs.

Since the introduction of the Shanghai-London Stock Connect in June 2019, four Shanghai-listed businesses, including Huatai Securities, have listed GDRs on the London Stock Exchange, raising a total of USD5.8 billion. Clifford Chance has offered compliance services to all of them, Wang said.

Since last month, five more Chinese mainland-listed companies have announced plans to sell GDRs in Switzerland and another one to do the same on the LSE.

Issuing GDRs has a controllable time cycle and low additional regulatory requirements, Wang pointed out, adding that it can also raise the issuers’ international visibility and so attract global investors and enhance the scope and depth of their business in Europe.

At present, foreign companies are still have a wait and see attitude to the possibility of secondary listings in the Chinese market. An insider at the investment banking department of a leading securities firm told Yicai Global that they have heard nothing so far on any CDRs issuing plans.

Editors: Tang Shihua, Futura Costaglione