Registration-based system set for as early as March
China's legislature passed a plan on Sunday to reform its current approval-based mechanism for IPO listings and shift toward a registration-based system as early as in March.
The Standing Committee of the National People's Congress (NPC), China's legislature, has passed a proposal to implement the registration-based IPO system, the Xinhua News Agency reported on Sunday.
The passed proposal, which will go into effect on March 1 and last two years, authorizes the State Council, China's cabinet, to adjust the relevant regulations under current security laws to enable implementation of the registration-based IPO system reforms.
With the passage, the State Council and the China Securities Regulatory Commission (CSRC) could start the process of implementing the registration-based IPO system on the Shanghai and Shenzhen stock exchanges as early as March, analysts said.
"The CSRC could start the process of implementation, but it will take some time," said Lu Hongjun, president of the Shanghai Institute of International Finance.
Lu told the Global Times on Sunday that the new process would be the most significant change ever to the country's IPO mechanism, reflecting China's maturating capital markets.
China currently uses an approval-based mechanism, under which companies are required to get CSRC's approval to float shares. The process generally takes a long time, creating a logjam in the IPO pipeline.
As of December 7, there were about 675 companies awaiting CSRC approval to issue IPOs worth about $63 billion in total, according to the Wall Street Journal.
Analyst said with proper implementation and oversight, the new process could help to ease up the logjam, while preventing a flood of companies from rushing into the market at the same time.
The plan's passage came after the NPC's Law Committee passed the proposal earlier on Sunday and suggested that the Standing Committee to pass it.
The registration system, which is widely used in mature stock markets in countries such as the US, will be more market-oriented, more conducive to fostering a stable stock market and better able to guide more capital to the real economy, CSRC Chairman Xiao Gang told NPC members last week.
The new IPO process could benefit the real economy by providing companies with an alternative fundraising channel to help them avoid fractures in the ca
