Chinese businesses swarm to Switzerland in order to raise capital through new stock listings

Chinese businesses seeking to raise capital abroad have looked to Switzerland, where they have quickly received regulatory approval.

According to Baker McKenzie, which claimed to have served as the first four Chinese companies to list shares on a new stock connect program with Switzerland on July 28, the firm served as legal counsel for those companies. The businesses raised approximately $1.5 billion.

According to Wang Hang, a partner in Baker McKenzie's capital markets practice in Beijing, the new share issuance was approved by the Chinese securities regulator in "just a few weeks." He pointed out that the approval procedure for issuing additional shares could take several months or even half a year.

A request for comment from CNBC was not immediately answered by the China Securities Regulatory Commission.

The most recent listings, which show a new avenue for Chinese companies listed on the mainland China A share market to raise money abroad, are not initial public offerings.

In order to participate in the new China-Swiss stock connect program with the Shanghai and Shenzhen exchanges, the four companies, GEM, Gotion High-tech, Keda Industrial Group, and Ningbo Shanshan, issued global depositary receipts (GDR) on the Six Swiss Exchange. The four businesses are involved in the manufacturing or new energy sectors.

Since Beijing's crackdown on Didi in the summer of 2021 and the high-profile suspension of Ant Group's planned IPO in late 2020, attention has been focused more on Chinese companies' access to international capital markets.

China's new user privacy and national security laws have raised the bar for international public offerings. Many Chinese companies could be delisted from New York stock exchanges if an audit agreement with the U.S. cannot be reached.

However, mainland China and Hong Kong frequently have stricter requirements than the American market for businesses looking to list.

More than 920 companies were scheduled to go public in Hong Kong and mainland China as of June 14, according to an EY report. Little had changed since March.

Some Chinese companies that can are looking to Switzerland as they wait for information on a quicker IPO process.

According to Wang, who cited a conversation on the morning of Thursday, July 28, a client who was considering a Hong Kong IPO decided to prioritize a GDR listing in Switzerland and pursue a Hong Kong listing later.

According to Wang, "at least 13 Chinese listed companies have already announced their intention" to issue shares since news of the upcoming China-Swiss connect program broke earlier this year. Other businesses are preparing for that, but they have not announced it.

By fLEXI tEAM