Business / Markets

Regulator to reform IPO rules

By LI XIANG (China Daily) Updated: 2015-01-17 09:24

Such a system has led to excessively high IPO valuations and created either sharp gains or sharp falls of new stocks on their trading debut, which in turn led to large fluctuations in the overall market.

To address these issues, the CSRC had in November submitted the draft reform plan to the State Council, the country's cabinet, for review. Although Xiao did not mention the time-table for launching the reform, it is expected that the regulator will announce the plan this year to seek public opinions.

But some experts said that it may take much longer than the expected time for the final reform plan to be issued as it involves revision of the country's Securities Law, which currently requires companies to have a record of profitability in order to be qualified for IPO applications.

They said that the country's legislature will likely approve the modification of the Securities Law by this year, which means that the IPO reform will be initiated in 2016 at the earliest.

In his speech, Xiao also warned about potential risks for pushing the reform as it could influence investors' anticipation on the expansion of the market capitalization and could increase the risk of fraud by companies of poor quality.

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