CDRs set to debut on China bourses

2018-05-30
China Daily

Chinese tech companies listed overseas will soon issue Chinese Depository Receipts on the Shanghai and Shenzhen stock exchanges, China Securities Regulatory Commission Vice-Chairman Fang Xinghai said on May 29.

Fang said the move would effectively combine Chinese tech companies with Chinese capital as “red-chip” enterprises, which operate in China but are registered and listed overseas, return to the A-share market by issuing CDRs.

CDRs, which are similar to American depositary receipts, are certificates allowing investors to hold shares listed across borders.

The commission released draft rules in May, under which the CDR pilot program applies to overseas-listed firms — each with a market capitalization of no less than 200 billion yuan ($31.7 billion) — that operate on the Chinese mainland.

Zhang Dongke, deputy general manager of the Shanghai Stock Exchange, said on May 28 that the bourse has done all of the preparatory work needed for the CDR pilot program.

Dong Dengxin, a finance professor at Wuhan University of Science and Technology, said the introduction of the CDR system shows that Chinese regulators have become more willing to embrace innovation and bring vitality to the nation’s capital market.

Fang also said the commission is accelerating the pace of introducing the first product for the trading link between Shanghai and London before the end of this year, taking the first step in connecting the world’s largest emerging market to mature markets.

The People’s Bank of China Governor Yi Gang announced in April that China aims to launch the Shanghai-London stock connect within the year, allowing traders in both nations to buy on each other’s markets across time zones.

“China’s capital market will continue to open to the world in breadth and depth,” said Fang.

He said that global institutional investors have not allocated Chinese assets with high positions. But with the increase in the status of China’s economy and currency, more and more foreign funds will flow into China.

“Under these circumstances, maintaining financial market stability is vital and we should prevent all kinds of assets including stocks, bonds and loans from forming price bubbles,” said Fang.

Luke Ellis, CEO of asset management company Man Group, said China has great potential as it is one of the most liquid markets in the world. “I think the opening-up of Chinese financial market in the past five years has been remarkable, and we are always happy to embrace more opportunities,” said Ellis.