China Performs U-Turn On Overseas Listings Rules

by Mary Swire, for LawandTax-News.com, Hong Kong

27 October 2005

The Chinese authorities have performed a U-turn on new rules which have made it harder for domestic firms to obtain overseas listings by registering companies offshore.

According to a statement published on the State Administration for Exchange Control's (SAFE) web site, from November 1, Chinese citizens will no longer require the prior approval of the authorities to set up 'special-purpose companies,' a vehicle used to seek a listing on a foreign exchange.

“Related rules published earlier this year would be abolished,” SAFE confirmed.

The rules, published in January and April this year, were principally aimed at preventing foreign illegal exchange outflows, although the Chinese government was also seeking to prevent Chinese citizens making large gains overseas while avoiding Chinese income tax.

The about turn by the Chinese government has been welcomed by the venture capital industry, and groups such as the China Venture Capital Association had lobbied SAFE to change the rules, warning that they would block a vital route to raising funds for new ventures, particularly in China's hi-tech sector.

However, some analysts are suggesting that the new rules remain somewhat ambiguous, and do not clarify important issues such as the repatriation of funds earned overseas.

Recommended