The reason is that with the promulgation of the Pilot Measures for the Administration of Overseas Issuance of Securities and Listing of Chinese Enterprises and the five supporting guidelines (hereinafter referred to as the “New Regulations for Overseas Listing and Filing”) by China on March 31, 2023, Chinese enterprises’ overseas listing continues to be encouraged by the regulatory level’s support for eligible enterprises going public overseas.
   Secondly, on November 27, 2023, the People’s Bank of China, the State Administration of Financial Supervision, the China Securities Regulatory Commission and other departments jointly issued the Notice on Strengthening Financial Support Measures to Help the Economic Development and Growth of the Private Sector, which specifically “support eligible private enterprises go public overseas, so as to make good use of two markets and two resources.”
    In addition, the OPI filing process for domestic companies has been greatly accelerated with emergence of more “green light” cases, which boosted market expectations. Among them, Chechen Technology became the first company to adopt the VIE structure to list in the United States after the implementation of the new regulations for overseas listing and filing in 2023.

    From the perspective of the listing industry, the 34 medium-sized companies listed in the US in 2023 engaged in industries such as information technology, artificial intelligence, logistics services, financial services, education and manufacturing. Among them, the top industries were logistics services, financial services and pharmaceutical industries.

• 3 listed small and medium-sized companies were in the logistics service industry, including Shengfeng Logistics, Jiayuda Logistics and GVH;
• 4 listed small and medium-sized companies were in the financial services industry, including Tiancheng Jinhui, Huaying Dongfang, Shengde Wealth and Yiying Securities;
• 3 listed small and medium-sized companies were in the pharmaceutical industry, including Shuodi Biological, Zhongjin Medical and Anuo Pharmaceutical.
   

III. Analysis of the listing of Chinese enterprises in the United States in 2023

(I) The scale of fundraising increased compared to last year, but the overall scale of fundraising was still not high.

      In 2023, the overall annual capital raised by U.S.-listed Chinese enterprises was about USD 780 million, and most of them were small and medium-sized. Judging from the distribution of new stock fund-raising, the average amount of capital raised by medium-sized enterprises that have completed the listing in 2023 was relatively small. The amount of raised capital of most enterprises was less than US110 million, and the total companies was 18, accounting for about 54.5%; the number of enterprises with a raised capital of USD 10 million to USD 20 million ranked second, and the total enterprises was 8, accounting for about 24.2%; the number of enterprises with a raised capital of USD 20 million to USD 100 million was 5, accounting for about 15.1%; Only Hesai Technology and Sodi Biology were raised a capital of more than USD 100 million.
 

(II) The certainty and normality of the overseas listing process was improved.

IV. Suggestions for companies to go public in the United States

      Based on practical experience, we will recommend that a round of PRE-IPO financing be completed before the IPO in the U.S. It is ideal to introduce overseas cornerstone/strategic investors. On the one hand, it is conducive to the valuation confirmation at the time of listing, and on the other hand, it is conducive to the smooth follow-up roadshows and fund-raising by US brokers.
 

Two points that need special attention:

1. Build an overseas red chip structure: This is because there is involvement of a series of approval and filing, such as the filing under Circular 37, the approval and filing of overseas investment ODI, the establishment of overseas entities and bank account opening, etc.;

2. Listing and filing with the China Securities Regulatory Commission (generally submitted after the initial secret submission): It is necessary to pay special attention to domestic enterprises that fall within the scope of special security reviews, such as Internet platforms that engage in sensitive data processing or possess massive amounts of personal user information, and important industries or fields that may affect national security. Companies in important industries or fields need to reserve sufficient time on the listing schedule to complete the relevant pre-review and filing procedures. If they fail to pass the special security review, the filing cannot be completed.
   The above two points lead to certain uncertainties in the listing of enterprises. Therefore, it is recommended that enterprises determine the equity structure plan and listing plan for overseas IPO as soon as possible.

 (II) Select a suitable general lead agency for the project to promote the listing in the United States

      The proposed listed company should introduce professional intermediaries as soon as possible to plan and prepare in advance, so as to facilitate the smooth progress as a whole. Especially, they should select service providers with more practical experience in the project as the general lead. At present, the mainstream of the market is to choose Chinese financial general counsel or Chinese lawyers as the project leader.
     After selecting the general lead agency, the companies to be listed in the United States should formally start the listing work, promote various preparations, and formulate a listing plan (the picture below is for reference).

5. Conclusion

      The inclusiveness of U.S. stocks is an important factor for Chinese companies to go public in the United States. Any companies can be listed regardless of their equity structures, special business attributes, or whether they are in a loss-making state. In the IPO of Chinese companies in the United States in 2023, 13 companies, including UCAR, Adlai Nortye Pharmaceutical, Zhenkunhang, and DayDayCook, were in a state of loss. In addition to listed companies, more than 100 Chinese companies have submitted IPO applications to the United States. In addition, with the normalization of the new filing regulations and the acceleration of filing, more than 14 companies have completed the filing so far in the new year.
     In addition, the macro background of global IPO recovery is improving, and companies are urgently waiting for better market conditions to broaden the IPO window. In the context of geopolitical detente, IPO activities are expected to be accelerated. It is expected that driven by factors such as the approaching end of the US dollar interest rate hike cycle, the continuous improvement of the Sino-US audit and regulatory cooperation mechanism, and the gradual maturity of the overseas listing and filing system, the number of U.S.-listed Chinese companies will show a stronger growth trend in 2024.