China proposes tighter rules but no ban for offshore listings

China's securities watchdog on Friday proposed tightening rules governing Chinese companies listing abroad, which it said would improve oversight while allowing them to continue to do so.

The draft rules, which had been keenly awaited by investors and were posted by the China Securities Regulatory Commission on its website, extend the CSRC's oversight of offshore listings to Chinese firms with variable interest entity (VIE) structures.

The CSRC said that the existing rules regulating offshore listings were outdated and the proposed new ones reflect China's desire to further open up and are "not about policy tightening."

Previously, the regulator would only examine companies incorporated onshore in China that proposed an offshore listing, such as in Hong Kong.

VIEs have mostly been used by companies that list on offshore stock markets, primarily the United States, to skirt Chinese rules restricting foreign investment in sensitive industries such as media and telecommunications.

Most offshore-listed Chinese tech firms, including Alibaba Group Holdings and JD.com Inc, use the structures, which give them more flexibility to raise capital, while also bypassing the IPO vetting process that locally-incorporated companies have to go through.

CSRC said the proposed registration process should take up to 20 working days if adequate materials were submitted.

It will also require international banks that underwrite a Chinese firm's offshore listing to register with the CSRC.