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Chinese companies head to Switzerland to raise funds through IPOs

Four Chinese companies raised about $1.5 billion in July by issuing shares on the Six Swiss Exchange through a new China Stock Connect program.

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BEIJING — Chinese companies looking to raise funds overseas have turned to Switzerland — and won swift regulatory approval to do so.

That’s according to Baker McKenzie, who said he acted as legal counsel to the first four Chinese companies to list shares through a new connection program with Switzerland on July 28. The companies have raised approximately $1.5 billion.

China’s securities regulator approved the new share issue in “just a few weeks,” said Wang Hang, a partner in Baker McKenzie’s capital markets practice in Beijing. He noted that the approval process for other share issues could take a few months or even six months.

The China Securities Regulatory Commission did not immediately respond to a CNBC request for comment.

The latest listings are not initial public offerings, but reflect a new channel for Chinese companies listed on the mainland China A-share market to raise overseas capital.

The four companies – GEM, Gotion High-tech, Keda Industrial Group and Ningbo Shanshan – have issued Global Certificates of Deposit (GDR) on the Six Swiss Exchange under a new Sino-Swiss equity connection program with the Shanghai and Shenzhen stock exchanges. All four companies operate in new energy or manufacturing industries.

Chinese companies’ access to foreign capital markets has come under increased scrutiny since the high-profile suspension of Ant Group’s planned IPO in late 2020 and Beijing’s crackdown on Didi in the summer of 2021. .

On the Chinese side, new regulations regarding user privacy and national security have raised the bar for overseas public offerings. The potential failure to reach an audit agreement with the United States threatens the delisting of many Chinese companies from New York stock exchanges.

But companies seeking to register in mainland China and Hong Kong often face stricter requirements than in the US market.

A report from EY found that as of June 14, more than 920 companies were on track to go public in mainland China and Hong Kong. Little has changed since March.

Chinese companies line up

As Chinese companies wait for clarity on a faster IPO process, some that can are looking to Switzerland.

A client considering a Hong Kong IPO decided to prioritize an RDA listing in Switzerland and pursue a Hong Kong listing later, Wang said, citing a conversation on the morning of Thursday, July 28.

Since announcing the upcoming China-Swiss Connect program earlier this year, “at least 13 Chinese listed companies have already announced their intention” to offer shares, Wang said. “There are other companies that are planning this but haven’t made an announcement.”

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