China to Launch Registration-Based IPO in 2016

On Sunday, the country's top legislature authorized the roll out of the new IPO registration mechanism to complete the amendment of the Securities Law. In a statement by the China Securities Regulatory Commission, officials said the legislative approval of launching the registration-based IPO system marked significant development to the Chinese capital market and implements an important measure to allow the market force to determine the allocation of resources. It is not merely about delegating the IPO approval power to the stock exchanges but a major transformation of the regulator's role, the registration-based IPO system will emphasize the information disclosure rather than corporate prospect and profitability. The regulator said that it will no longer endorse the value of prospective companies under the new system but it will still control the pace and pricing of IPOs to maintain market stability.

Cutting Red Tape

China took steps to further streamline the permitting process by separating business licenses from administrative permits. The pilot reform, which allows some companies to get their businesses running without obtaining administrative permits, will be practiced in the Pudong New Area of Shanghai. In some areas where the market mechanism is effective and self-discipline is well in place, administrative permits will be canceled. For the sector of processing trade, administrative permits will be replaced by registration, and companies can start their business activity as soon as they submitted relevant documents to authorities. In some other areas where administrative permits cannot be canceled for the time being, the process will become easier and companies can have their permits immediately after submitting materials. 

New IPO Scheme May be in the Works for China

The legal procedure for registration-based initial public offerings is expected to be completed as early as the end of this month, a substantial step to wrap up the biggest reform of China's stock market. An executive meeting of the State Council, presided over by Premier Li Keqiang on Wednesday, discussed a draft amendment to the country's Securities Law that proposed changing the current approval-based IPO mechanism to a registration-based one at the Shanghai Stock Exchange and Shenzhen Stock Exchange. The new policy would realize within two years of the draft's approval by the Standing Committee of the National People's Congress.

China Strengthening Enforcement of Anti-Counterfeiting

China is strengthening its enforcement of its anti-counterfeiting laws. In recent actions, China is going after online retailers (such as taobao.com) and requiring them to take a more proactive stance towards preventing the sales of counterfeit products through their platforms. On November 7, 2015, China issued the “Opinions on strengthening the management of infringement and counterfeiting in the field of Internet", which clarifies the online sales of counterfeit goods and internet piracy as regulatory focus, clears responsibilities of the e-commerce enterprises, network service providers and up-downstream related enterprises, including guiding and supervising the e-commerce platform to strengthen the qualification examination of network operators, Urging internet service providers to implement the "Notice-Delete" obligation and implementing the real-name registration system for delivery enterprises of distribution, warehousing, postal, courier and so on. This is a small, but clear step towards a China more focused on IP protection.