China seeks to attract its tech giants to list at home

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The Chinese government has started to promote Chinese Depositary Receipts (CDRs) vigorously in a move to draw overseas-listed tech giants back to their home exchanges.

The CDR, a financial instrument representing a firm’s publicly traded shares, was introduced officially in June 2016. They not only help improve the valuation of Chinese concept stocks, but also boost China's stock market.

“With the CDRs promotion policy, it can encourage the capital market environment and improve the Chinese e-commerce market," said Wang Jianhui, general manager of the R&D department at Capital Securities. "Chinese technical shares are a little less compared to the United States. So, we want to push the innovation and creation. That’s why we have to increase the existence of technology companies in China.”

However, there still are limitations. To prevent a large impact on China’s A-share market, regulators will allow only three to five percent of a tech company's capitalization to be listed on the A-share market as CDRs.

Still, the small amount of CDRs may be exposed to price manipulation and excessive volatility. Wang said regulators will handle the issue carefully and increase shares gradually.

“The government will take some actions such as speeding up approvals for 'unicorns.' Three to five percent will be a standard and more shares would be allowed gradually. I think it won’t be a big problem yet,” he said.

The country's central bank said that qualified high-quality foreign companies would be allowed to issue stock in the mainland.