China Cuts Market Cap Requirement for CDR Issuers
What’s new: China’s securities regulator lowered the market-value threshold for eligible red-chip companies — overseas-incorporated companies with main business operations on the Chinese mainland — to list China Depositary Receipts (CDRs) at home.
In addition to overseas-listed Chinese companies with capitalization of at least 200 billion yuan ($28.3 billion), businesses with self-developed, world-leading technology, strong science and technology innovation ability and competitive advantages are now required to have only 20 billion yuan of market value to be eligible to issue CDRs, according to a new notice by the China Securities Regulatory Commission (CSRC).
The background: When the CSRC announced a pilot program to support innovative companies' domestic listings and issuance of CDRs two years ago, only five Chinese tech giants — Alibaba Group Holding Ltd., JD.com Inc., Baidu Inc., NetEase and Tencent Holdings Ltd. — met the criteria.
Lowering the market cap criteria aims to support a small number of innovative red-chip enterprises in line with a national strategy to grow through the capital market and promote financial supply-side structural reform, a person close to the CSRC said.
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