Market, page 23,
Issue 487, September 20, 2010
Translated by Tang Xiangyang
Original article: [Chinese] 
China has accelerated its efforts to launch an International Board.
According to sources close to the high-level executives of the Shanghai Stock Exchange, the China Securities Regulatory Commission (CSRC), the Ministry of Commerce (MOC) and the State Administration of Foreign Exchange (SAFE) have agreed on laws concerning the launch of an International Board. The only issues that remain to be settled are what technology will be used and the date of the launch.
According to an insider with the Shanghai Stock Exchange, if all goes to plan, preparations for the new board will be completed by the beginning of 2011 and it will be launched sometime around April next year.
The launch of the International Board has already gained official support from the Shanghai Municipal government.
Legal Obstacles
After several months of negotiation, the CSRC, MOC and SAFE jointly reported to the State Council earlier this month that there were no legal obstacles that would impede the launch of an International Board, and they recommended launching the new board as soon as possible.
According to a general manager of a large securities company located in Shanghai, the International Board will allow foreign companies to list on China's A-share market, which will allow domestic investors to buy shares in foreign companies with Chinese currency.
China's current Corporation Law does not allow foreign companies to list on the A-share market.
However, Liu Yanchun, an associate professor with the School of Law at Tongji University, argues that an International Board can be established under the Securities Law rather than the Corporation Law.
Red Chips Come Home
According to a source with the Shanghai Stock Exchange, the rules of International Board will be very similar to those of the other main boards in China. One of the few differences is that the international Board will rely more on IPOs, and new stock codes will be issued.
Aside from this, the Shanghai Stock Exchange also plans to be stricter in terms of information disclosure requirements for companies listed on the International Board.
It is also suggested that during the initial creation of an International Board, the Shanghai Stock Exchange could found a "special jurisdiction" for the companies listed on the board.
"Only foreign companies covered by this special zone will be allowed to issue A-shares," the above source said.
This is similar to the current situation of mainland firms listed on the Hong Kong stock market.
These companies use what's come to be referred to as the "red-chip model”: Chinese companies first register abroad - often in the British Virgin Islands, the Cayman Islands or Bermuda - and then are able to list on the Hong Kong stock market.
Because they're registered under special jurisdiction, they're able to evade some of the legal obstacles that prevent companies from listing on foreign boards.
According to the above source, foreign companies that list on the new International Board will be required to use a similar system to the "red-chips" and register in a "special jurisdiction zone" set-up by the Shanghai government.
Although it is possible that the International Board will also accept foreign companies registered in Hong Kong.
April 2011 Launch?
Established securities companies and investment banks are likely to be winners from the launch of an International Board and the securities company source quoted above told the EO that the less-established securities companies have attempted to delay the introduction of the board by lobbying high-level officials of the regulatory bodies.
But the Shanghai government has backed the International Board. "The launch of an International Board will play a key role in promoting Shanghai as an international financial hub. That's why the Shanghai government has spared no effort in supporting it," the above source said.
No exact date for the board launch has yet been set, and many are predicting that the exact timing of the launch will be determined to an extent by the future performance of the domestic A-share market.
According to an insider with the Shanghai Stock Exchange, if all goes to plan, preparations for the new board will be completed by the beginning of 2011, and it will be launched sometime around April next year.
Links and Sources
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This article was edited by Tang Ruoji and Paul Pennay
