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China CDR Rules Fall Short on Tackling Convertibility Hurdle

The lack of details in the latest draft regulations on the convertibility between China Depositary Receipts and the underlying shares they represent has disappointed many in the markets. Photo: VCG
The lack of details in the latest draft regulations on the convertibility between China Depositary Receipts and the underlying shares they represent has disappointed many in the markets. Photo: VCG

China has issued detailed rules to allow the overseas-listed shares of tech giants such as Alibaba Group Holding Ltd. to be traded on domestic stock exchanges through the issuance of China depositary receipts (CDRs). But they do not contain specifics on the key issue of convertibility between the receipts and the underlying shares they represent.

Draft regulations released on Friday (link in Chinese) by the China Securities Regulatory Commission (CSRC) cover a wide range of issues, including technical and administrative measures governing the listing and trading of CDRs, information disclosure, investor protection and the legal responsibilities of various parties. They follow the publication on March 30 of the listing criteria for companies eligible for the CDR trial, which is aimed at encouraging overseas-listed high-tech companies — such as Alibaba, JD.com Inc. and Baidu Inc. — to return home.

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