Four problems concerning “IPO Poverty Alleviation”
By Pi Haizhou
Original, GPIG , 11-17-2016
Since the publication of the China Securities Regulatory Commission’s Proposals on Playing the Role of a Capital Market on Serving the National Poverty Alleviation Strategy (Proposals) by the China Securities Regulatory Commission, “IPO poverty alleviation” has become the hottest topic on the market. The more it is discussed, the more concerned investors become, which proves that this topic concerns the benefits of all aspects of the market. From another perspective, it illustrates that management must handle several issues about “IPO poverty alleviation”, among which four problems stand out.
First, there is the issue of the proper management of the relation between the IPO green channel and strict investigations.
One of the priorities of “IPO poverty alleviation” is the policy according to which offerings are to be investigated once handed and stocks are to be issued once approved, which is to be applied to enterprises in poverty-stricken areas. Up until today, there have been many enterprises waiting for initial public offerings. Under these circumstances, this policy opens a convenient green channel, which at the same time requires better management of the relation between IPO green channel and strict investigations. Nominally, the “IPO poverty alleviation” doesn’t lower the IPO standard. But what worries the market is that the Investigation Committee might loosen the IPO requirements for enterprises in poverty-stricken areas in the name of “IPO poverty alleviation”, which will negatively influence the quality of those enterprises. The green channel has been accepted, but strict IPO investigations are also necessary.
Second, there is the issue of the proper management of the relation between the IPO green channel and transparent and regularized publications.
The policy according to which offerings are to be investigated once handed and stocks to be issued once approved will be applied to enterprises from poverty-stricken areas applying for IPO, which strengthens efficiency. But this efficiency must be based on the publication of transparent information. Neither of these two elements can be neglected. In fact, the higher level of efficiency we reach, the bigger our task becomes in terms of guaranteeing the transparency and regularization of publications. The green channel can’t neglect the transparency of information publications nor supervision from the society.
Third, there is the issue of the proper management of the relation between the IPO green channel and IPO volume control.
When it comes to “IPO poverty reduction”, one of the concerns of the market comes from the pressure that results from issuing new stock. Because of the policy according to which offerings are to be investigated once handed and stocks to be issued once approved for enterprises from poverty-stricken areas applying for IPO, the market will face a strong pressure from newly-issued stock. Hence, it’s necessary to properly manage the relation between the IPO green channel and IPO volume control. The government shouldn’t put too much issuing pressure on the market even as it faces the increasing number of rural enterprises.
Fourth, there is the issue of the proper management of the relation between attracting enterprises and strengthening supervision.
The stipulation in Proposals concerning “enterprises registered in poverty-stricken areas, paying income tax above 20 million RMB ($3 million) in poverty-stricken areas, and staying in the place of registration for a period of over 3 years” creates favorable conditions for attracting investments to poverty-stricken areas.
From this perspective, precautions should be taken and the enterprises fitting these criteria should be supervised so as to prevent them from breaking their promise, i.e. that they should stay in the place of registration for a period of over 3 years. Regulations upon this should be clarified. The shares outside poverty-stricken areas of enterprises that fail to keep their promises and draw back from the market are to be bought back by the issuer, the shareholder and the responsible persons of the recommendation institution.
The author is Pi Haizhou, a Chinese financial commentator. The article is originally published in stcn.com and is translated by Fang Rongrong.
By Pi Haizhou
Original, GPIG , 11-17-2016
Since the publication of the China Securities Regulatory Commission’s Proposals on Playing the Role of a Capital Market on Serving the National Poverty Alleviation Strategy (Proposals) by the China Securities Regulatory Commission, “IPO poverty alleviation” has become the hottest topic on the market. The more it is discussed, the more concerned investors become, which proves that this topic concerns the benefits of all aspects of the market. From another perspective, it illustrates that management must handle several issues about “IPO poverty alleviation”, among which four problems stand out.
First, there is the issue of the proper management of the relation between the IPO green channel and strict investigations.
One of the priorities of “IPO poverty alleviation” is the policy according to which offerings are to be investigated once handed and stocks are to be issued once approved, which is to be applied to enterprises in poverty-stricken areas. Up until today, there have been many enterprises waiting for initial public offerings. Under these circumstances, this policy opens a convenient green channel, which at the same time requires better management of the relation between IPO green channel and strict investigations. Nominally, the “IPO poverty alleviation” doesn’t lower the IPO standard. But what worries the market is that the Investigation Committee might loosen the IPO requirements for enterprises in poverty-stricken areas in the name of “IPO poverty alleviation”, which will negatively influence the quality of those enterprises. The green channel has been accepted, but strict IPO investigations are also necessary.
Second, there is the issue of the proper management of the relation between the IPO green channel and transparent and regularized publications.
The policy according to which offerings are to be investigated once handed and stocks to be issued once approved will be applied to enterprises from poverty-stricken areas applying for IPO, which strengthens efficiency. But this efficiency must be based on the publication of transparent information. Neither of these two elements can be neglected. In fact, the higher level of efficiency we reach, the bigger our task becomes in terms of guaranteeing the transparency and regularization of publications. The green channel can’t neglect the transparency of information publications nor supervision from the society.
Third, there is the issue of the proper management of the relation between the IPO green channel and IPO volume control.
When it comes to “IPO poverty reduction”, one of the concerns of the market comes from the pressure that results from issuing new stock. Because of the policy according to which offerings are to be investigated once handed and stocks to be issued once approved for enterprises from poverty-stricken areas applying for IPO, the market will face a strong pressure from newly-issued stock. Hence, it’s necessary to properly manage the relation between the IPO green channel and IPO volume control. The government shouldn’t put too much issuing pressure on the market even as it faces the increasing number of rural enterprises.
Fourth, there is the issue of the proper management of the relation between attracting enterprises and strengthening supervision.
The stipulation in Proposals concerning “enterprises registered in poverty-stricken areas, paying income tax above 20 million RMB ($3 million) in poverty-stricken areas, and staying in the place of registration for a period of over 3 years” creates favorable conditions for attracting investments to poverty-stricken areas.
From this perspective, precautions should be taken and the enterprises fitting these criteria should be supervised so as to prevent them from breaking their promise, i.e. that they should stay in the place of registration for a period of over 3 years. Regulations upon this should be clarified. The shares outside poverty-stricken areas of enterprises that fail to keep their promises and draw back from the market are to be bought back by the issuer, the shareholder and the responsible persons of the recommendation institution.
The author is Pi Haizhou, a Chinese financial commentator. The article is originally published in stcn.com and is translated by Fang Rongrong.
