New regulatory measures aim to make capital market open, secure

A document regulating strategic investment by foreign investors in listed companies was revised and issued jointly by relevant central departments on Nov 1.

The regulation was issued in 2005. Since then, foreign investors have made investments in over 600 listed companies in China, and the scale of the securities market has expanded significantly. Moreover, there have been significant adjustments to related regulatory systems, necessitating revisions of the regulatory measures.

The new document allows individual foreign nationals to invest in China; the original version only allowed foreign legal persons or organizations to make investments in the country.

The original regulation required foreign investors to have a total overseas actual assets of at least $100 million or manage overseas actual assets totaling no less than $500 million. The revised version stipulates that if a foreign investor does not become the controlling shareholder of a listed company after making a strategic investment, the asset requirement is reduced to no less than $50 million or managed actual assets of no less than $300 million.

Besides the original methods of targeted additional issuance and agreement transfer, the revision allows foreign investors to implement investments through tender offers. For investments made through targeted issuance or tender offers, it allows the use of shares of unlisted companies abroad as payment consideration.

While the original version stipulated that the shareholding ratio obtained by foreign investors from their initial investment in a listed company should be above 10 percent, and the acquired shares could not be transferred within three years, the revision eliminates the shareholding ratio requirement for strategic investments made through targeted issuance, and reduces the shareholding ratio requirement for investments made through agreement transfer or tender offer from 10 to 5 percent.

The revision allows investors to make compliance commitments during information disclosure, and connects with the foreign investment security review system and anti-monopoly review rules. It also adds administrative penalty provisions for commercial authorities, which will ensure the domestic capital market becomes more open and also secure.

The revised measures aim to guide more foreign capital toward listed companies.