CSRC helps innovative firms to launch CDRs on the mainland

Innovative companies are being given a lending hand to go public on the mainland market by China's securities regulator which has issued new rules on issuing and trading of China Depositary Receipts.

The China Securities Regulatory Commission issued nine policy papers on its official website late on Wednesday that cover the core rules for CDRs in the domestic capital market.

The new rules aim to help companies in high-tech or strategic emerging industries, including the Internet, big data, cloud computing, artificial intelligence, software and integrated circuit, high-end equipment manufacturing, and biological medicine, to issue shares or depository receipts on the  Chinese mainland.

The rules came into effect immediately, and qualified innovative companies can submit applications to issue CDRs to the CSRC from yesterday.

Drawing up the trial rules on CDRs, revising the regulations on initial public offerings and launching supporting rules laid the foundation for innovative firms, especially "unicorn" companies listed overseas, to return to the domestic capital markets via IPOs or CDRs, the CSRC said in a statement.

The new rules set strict standards and mechanisms for the selection of pilot companies applying for the CDR program.

The statement said that foreign-listed Chinese companies that want to become pilot companies are required to have a market value of no less than 200 billion yuan (US$31.29 billion). 

Innovative companies not listed abroad need to have a valuation of no less than 20 billion yuan and operating income of not under 3 billion yuan to qualify for the pilot program.

Unlisted firms can also become pilot companies if they conduct independent research and development, boast leading technology, and have researchers and developers accounting for over 30 percent of the total staff and more than 100 invention patents related to their main business, the statement said.

This will pave the way for overseas-listed technology giants such as Alibaba, JD.com, Tencent, Baidu and NetEase to trade in the mainland markets.

Meanwhile, the CSRC will seek professional opinion by setting up a advisory committee on scientific and technological innovation.

The CSRC will also strictly control the number of pilot innovative enterprises and the amount of funds to be raised for the program, and will time and pace the issuance of CDRs.

On the same day, the CSRC also approved the launch of six funds to invest in CDRs. They are respectively issued by China Asset Management, China Southern Fund, Harvest Fund Management, China Merchants Fund Management, E Fund Management and China Universal Asset Management.