As the Shanghai Stock Exchange gears up for an international board hosting foreign companies, analysts warned that many regulations still need to be hammered out and considerable obstacles remain in the way.
"The rules for the new board are being formulated, and we will conduct some tests for the start-up phrase," Liu Xiaodong, deputy manager of the SSE, said at the 8th China Financial Markets Conference Monday.
Having business in China is the first requirement for foreign companies to get listed, he said.
"The threshold for companies to enter the market is relatively high," he said, but did not disclose the exact timeline for launching the board or the number of firms planning listings.
He also denied rumors that hundreds of companies met the new board’s requirements.
Some well-known international companies will be allowed to get listed first, according to Liu.
The price of the shares on the international board can be denominated in yuan, several insiders familiar with the new rules were quoted by Caijing Magazine as saying.
But several key issues remain unsettled, and consequently it will still take a long time before the launch, according to analysts.
It is unrealistic to require an international company with assets all over the world to comply with strict Chinese rules, said Lin Yixiang, chairman of TX Investment Consulting. "Too much intervention by the government would affect their interest in getting listed."
Several rules including accounting standards need to be modified, he added.
"The most urgent issue that would hold up the project is the restricted exchange and lack of internationalization of the yuan," Xiang Songzuo, director of the research institute of Pacific Securities, said Tuesday.
Some other technical issues like how to protect the rights of the investors and shareholding limits are under discussion, Xiang added.
And Xiang also suggested that the regulators should learn experiences from Japan, South Korea, and other countries which have launched international boards.
Japan set up an international board in the 1980s, and had 131 foreign companies listed on the Tokyo Stock Exchange (TSE) by the end of 1991. But after the financial crisis, a large number of companies delisted, and the foreign division of TSE was finally shut down in April 2004.
Chen Changjie, an attorney with Guangzhou-based law firm Guangda, was quoted by Caijing Magzine as saying that Japan’s international board failed due to a complex, tedious review and approval process.
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