U.S.-listed Chinese companies need Beijing’s approval for secondary

BEIJING — If U.S. regulation forces Chinese companies to delist from New York, new rules from Beijing further complicates their path to raising money in public markets abroad.

Since Tuesday, new rules from the Cyberspace Administration of China require Chinese internet platform companies with personal data of more than 1 million users to get approval before listing overseas.

While the rules do not apply to companies that have already gone public, those pursuing dual or secondary listings overseas must follow the CAC’s new approval process, according to a CNBC translation of a Chinese article published Thursday on the regulator’s website.

It’s yet another consideration for international investors looking at Chinese companies.

“The timetable for companies’ overseas listings has become longer, and uncertainty has increased for listing,” said Ming Liao, founding partner of Beijing-based Prospect Avenue Capital, according to a CNBC translation of the Chinese remarks.

As regulators and businesses figure out how the new measures will be implemented, institutional investors hope to better understand the government’s thinking by seeing some approvals for overseas listings, he said.

Fallout from Chinese ride-hailing app Didi‘s U.S. IPO in late June prompted Beijing to increase regulatory scrutiny on what was a rush of Chinese companies looking to raise money in New York.

Chinese IPOs in the U.S. have essentially dried up in the months since, while existing U.S.-listed Chinese stocks face the threat of delisting in coming years from Washington’s more stringent audit requirements.

Several of these Chinese companies, including Alibaba, have turned to Hong Kong for dual or secondary listings in the last few years. That way investors could swap their U.S. shares for ones in Hong Kong in the event of a delisting.