BEIJING — China’s forthcoming rules on overseas IPOs will apply to Chinese companies that want to list in Hong Kong, the China Securities Regulatory Commission told CNBC on Friday.

Shen Bing (director-general, international affairs) of the Commission spoke exclusively to CNBC about the draft rules that will affect Chinese companies who plan on listing in the U.S. after last summer’s crackdown.

Shen stated that overseas means, “of course,” in an extensive interview. Shen said, “Ofcourse it includes Hong Kong.”

Shen stated that the new rules will apply to Chinese companies who want to issue H-shares to Hong Kong. Shen also mentioned a “red chip” category, which was previously not subject to approval by the CSRC. The H shares refer to stock issued by mainland China businesses that trade in Hong Kong. Red chips, which are Hong Kong-trade shares owned by companies who do most of their business on the mainland and are not incorporated in mainland China, are Hong Kong shares.

The Chinese have stopped sending IPOs to America since July 2021. Beijing has changed the way domestic stock offers are made to allow companies outside China to raise funds.

Washington cites national security as one reason for these changes. This is what Washington used to do when it blacklisted Chinese companies in an effort to decrease investor exposure to shares allegedly connected to the Chinese military.

The Cyberspace Administration of China, which is becoming increasingly powerful, will require official authorization starting Feb. 15. data security reviews for certain companies before they are allowed to list abroad.

The CSRC and the State Council — the top executive body in China — have released more comprehensive draft rules, and the public comment period ended on Sunday. Chinese companies will have to file with CSRC for listing abroad. The commission promised that they would respond in 20 working days.

According to the draft rules, overseas listings will be prohibited in certain situations.

1. If other government departments see the offer as a danger to national security
2. If the major assets of the company are in dispute, you can sue the owner.
3. If the controlling shareholder, or an executive has been convicted of a crime within three years.

Shen however stated that listing a Chinese company overseas would not be prohibited by the rules. operated in an industry subject to restrictions or bans on foreign investmentChina mainland

Shen stated that the CSRC’s top priority for 2022 will be opening China’s markets to more foreigners. Shen said, “Overseas Listing is just one component of an open-up regime. [that]Our priority would be to make sure that it is not the only thing.”

The date is April 20, 2021 about 60 Chinese companies were looking to go public in the U.S.This summer, the New York real estate boom essentially stopped.

Only days after Chinese ride-hailing app DidiChina’s cybersecurity regulator instructed the company to stop new user registrations, and take its app off of app stores after its approximately $4 billion U.S. IPO.

One reason the cybersecurity probe had been initiated was to preserve national security, according to Didi. The date Didi will be able to add new customers is not known.

In December, the company declared it plans to delist from the New York Stock Exchange and pursue a listing in Hong Kong,But they didn’t disclose any timeframe.

Shen declined to speak on particular companies, but said that they had noticed a decline in overseas listings since last year’s second half. We hope that the new rules will be fully utilized by companies and allow them to resume listing on any foreign market.

Shen stated that he recognizes the strength of America’s market as “strong inclusivity for new start ups in new industry sectors,” even though markets in Greater China are catching up.

A sudden event also rocked confidence among foreign investors in Chinese markets and stocks. suspension of Alibaba-affiliated Ant Group’s IPO.Two days earlier, the news broke in Shanghai and Hong Kong.

Shen answered a question about whether new rules will eliminate the possibility that an IPO could be suspended for two days prior to its expected listing. [with]Clearer and better communication

Shen reiterated that overseas Chinese IPOs could be set up using the variable interest entity structure (VIE). He said that if they adhere to relevant regulations and rules, they could still file with the CSRC. We will verify compliance with them using the inter-departmental system before we give their response.”

VIEs are listed through shell companies, most often located in Cayman Islands. This prevents Chinese investors from voting majority in U.S. stocks.

The structure has been used by many Chinese businesses to list in America.

Shen stressed that the commission wants to make the filing process as efficient and effective as possible. Shen also said the commission was working closely with the relevant departments to provide more guidance about how companies can communicate with regulators to be able to list abroad.

“In this course we might provide regulatory advice [the]Shen explained that companies should be able to save time and not waste effort on things that will never happen. Shen noted that the CSRC would respond in 20 days, which is separate from any other department’s review time.

Shen didn’t specify when the final rules would be published or implemented.

“Relevant authorities reached quite [a]High degree of consensus on the rules. Therefore, we would expect that the approval process would be very efficient.” He said and also added that the final rules should be published “early”.

Some Chinese companies were likened to American firms before security concerns became more prominent in China and the U.S. Luckin Coffee were forced to delistMarkets in other countries due to fraud.

The American documentary “The China Hustle” estimates that, compared to a decade earlier than 10 years ago, retirement and pension funds were in decline. lost at least $14 billion to Chinese stocks that turned out to be frauds.Film director Yong-Chi Kuo called for greater regulation that focuses on the increased connection between Chinese financial markets, global systems and other countries.