One of the most respected finance publications in Asia-Pacific has dubbed plans to speed up IPOs for companies from impoverished parts of China ‘worrying’.
In a 19 September editorial, the Hong Kong Economic Journal attacked proposals from the China Securities Regulatory Commission (CSRC) to launch a fast-track in the nation’s listings regime, in which eligible firms could jump the queue on rivals from more affluent areas.
Announced on 15 September, the plans would give firms from 592 regions an automatic head start on the 836 companies currently stuck in China’s sluggish IPO holding pattern.
As the Journal points out, “Those at the back of the queue need to wait at least three to four years” before their IPO paperwork bears fruit. With that in mind, it argues, the CSRC scheme could hand eligible firms an unfair advantage.
Since the plans were unveiled, the publication notes, finance buffs have joked on the internet “that if one wants to get rich quick, all they have to do is set up a firm in a remote region like Qinghai or Guizhou and then apply for an IPO”.
The Journal argues: “Developing the capital market and alleviating poverty are two of Beijing’s key policy targets. And the securities regulator is trying to kill two birds with one stone.
“However, the authorities seem to ignore the fact that investors only care about making a profit rather than where the listed companies are from.”
In the Journal’s view, “The CSRC is not supposed to make a choice for investors by giving priority to companies in underdeveloped regions and indirectly guiding them to invest in these firms.
“The new policy will therefore distort the function of the capital market and compromise the interest of 140 million individual investors.”
The plan has even attracted doubts from China’s Securities Times – a stock market-themed subsidiary of Communist Party newspaper the People’s Daily.
According to the publication’s analysis – covered in London’s Financial Times – the fast-track plans would benefit a grand total of four firms among those languishing in the IPO queue.
Meanwhile, in comments to the South China Morning Post, Su Peike – chief researcher at the Public Policy Research Centre of Beijing’s University of International Business and Economics – said of the plans: “To tell you the truth, I took it as a joke when I was told the news.
“How can the IPO market help impoverished counties? What the new proposals bring is just interference to fair market competition, and they will make the capital market regress.”