HONG KONG, March 31 (Reuters) - China is considering
establishing a stock exchange to attract overseas-listed firms
and bolster the global status of its onshore share markets, two
people with knowledge of the matter told Reuters.
The country's State Council has asked the top securities
regulator to lead studies on how to design the exchange that
would target Chinese firms listed in offshore markets such as
Hong Kong and the United States, said the people.
The government hopes the initiative would also lure marquee
global firms such as Apple Inc and Tesla Inc,
which would have the option of carving out local businesses and
listing them on the new bourse, one of the people said.
The plan comes as Beijing and Washington remain locked in a
rivalry that has featured moves by the U.S. securities regulator
toward expelling Chinese companies from U.S. exchanges if they
do not comply with U.S. auditing standards.
About 13 U.S.-listed Chinese firms including Alibaba Group
Holding Ltd, Baidu Inc and JD.com Inc
have conducted secondary listings worth a combined $36 billion
in Hong Kong over the past 16 months, Refinitiv data showed.
With Sino-U.S. relations showing little sign of easing,
bankers and investors expect more such "homecoming" offerings.
Shares in Hong Kong Exchanges and Clearing (HKEX),
which has benefited from a slew of secondary listings by New
York-listed Chinese companies, gave up gains and slipped into
the red after the Reuters report.
The stock, which was up 0.7% before the news, dropped as
much as 1.9% in afternoon trade before ending down 1.3%.
Talks for the new exchange are in early stages and a time
frame and location are yet to be decided, said the people, who
declined to be identified as the discussions are confidential.
The China Securities Regulatory Commission did not respond
to a Reuters' request for comment.
China has two main onshore exchanges, in Shanghai and
Shenzhen, with combined listed market capitalisation of 78.7
trillion yuan ($12 trillion).
In the first quarter, Nasdaq and New York Exchange topped
the global bourses league table in terms of IPO proceeds, while
Shenzhen's tech-focussed ChiNext board and Shanghai's main board
were ranked 8th and 10th, respectively, according to Refinitiv
The same rules govern initial public offerings as well as
non-initial listings, in contrast to some other leading bourses,
such as Hong Kong's, which offer waivers for secondary listings.
One option under discussion is upgrading an existing listing
platform such as a smaller bourse in Beijing, said the people.
Beijing's municipal government has been lobbying for years
to upgrade its equity exchange for small and mid-sized firms,
known as the "New Third Board," to be home to U.S.-listed
Chinese firms, said one of the people and three other sources.
The securities regulator and a few government bodies have
for about six month been studying the feasibility of such an
upgrade, for which there is a "50-50" chance of adoption, said
one of the three sources.
In a meeting with regulators and institutions in February,
Cai Qi, head of Beijing city's Communist Party, called for the
capital to lead financial reform and develop a modern financial
industry, the official Beijing Daily reported.
The Beijing government's media office did not respond to
Reuters' requests for comment.
It is rare for foreign companies to raise funds through
China's equity markets partly due to the country's strict
control of foreign exchange.
Moreover, government attempts to open up its stock markets
to foreign firms and investors via stock connect projects
including the London-Shanghai Stock Connect have struggled to
take off against a backdrop of geopolitical challenges.
China launched a trial program in 2018 to lure
overseas-listed technology companies back home with Chinese
depositary receipts, or CDRs. That effort has also struggled for
success with most such firms opting for secondary listings in
"The biggest question is whether the new exchange can be
attractive enough," said one of the people. "Otherwise, it might
just turn out to be another madcap scheme."
($1 = 6.5623 Chinese yuan)
(Reporting by Hong Kong Newsroom, Zhang Yan and Julie Zhu;
Editing by Sumeet Chatterjee and Christopher Cushing)