CHINESE companies listed on overseas bourses may consider floats on the Shanghai Stock Exchange’s upcoming science and technology innovation board, analysts said.

The pilot project in China’s capital market reforms is expected to be launched in the April-June period.

“Companies with special ownership structures complying with related requirements and red-chip companies will both be allowed to list … ,” the China Securities Regulatory Commission (CSRC), said in an announcement Jan. 30.

Red-chip companies refer to mainland-based companies that are incorporated and listed outside the mainland, especially on the Hong Kong stock exchange and on bourses in New York, London and Frankfurt.

Analysts said the “special ownership structures’ mentioned in the Jan. 30 announcement refer to the structures of variable interest entity or VIE, which are adopted by some red-chip companies, especially Internet companies such as Alibaba and Tencent.

VIE structures enable investors abroad to invest in and control mainland-based companies by contracts instead of ownership. China does not allow foreign capital to take control of companies in certain industries via direct stock ownership.

“The new board’s acceptance of VIE structures and red-chip companies will provide convenience for red-chip companies to list on mainland bourses,” said Wang Tingting, an associate professor of finance at Central University of Finance and Economics.

To list on the new board, red-chip companies need not delist from bourses outside the mainland, according to the CSRC. Red-chip companies are allowed to list on the new board by issuing Chinese Depositary Receipts or CDRs, it said.

(China Daily)