China to soon launch long-awaited IPO reforms

China is set to launch Initial Public Offering (IPO) reforms with an aim to make it easier for companies to raise money from investors. The reforms are long-awaited and are set to be rolled out on the heels of a chaotic exit from Zero-Covid policy. China's growth rate has slowed to record levels. The government is looking to restore investor confidence.

Under the new reforms, regulators will have less say in approving IPOs and stock exchanges will have a greater role. Currently, companies have to take go-ahead from regulators who vet the IPO plan before money can be raised from investors.

The new IPO system will be registration based like the model in the US. The new system will apply to all domestic stock exchanges in China, including those in Shanghai and Shenzhen. China Securities Regulatory Commission (CSRC) made an announcement in this regard on Wednesday (February 1).

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“The essence of this reform is to let the market decide,” the CSRC said.

The CSRC said that there will be no administrative restrictions on pricing and scale of new shares.

“This is an important step to reform the capital market. The government will allow market [forces] to play a bigger role allocating resources,” said Zhiwei Zhang, president and chief economist at Pinpoint Asset Management. Zhang was quoted by the CNN.

“It is one step in the right direction,” he said.

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