The failure of China's regulation of overseas listings by private companies

: an exploration of solutions

Abstract

Since the end of 1990s, many Chinese private companies have been seeking offshore listing to fund their business activities. However, they have to face numerous regulatory hurdles in undertaking offshore listing activities in a manner to which companies in other jurisdictions are not usually accustomed to. This thesis examines critically the regulation of offshore listings of private companies in China. It demonstrates that despite the fact that China's regulatory bodies have been attempting to control offshore listing practice, the success of regulatory efforts has never materialized. The government has failed to implement those poorly-designed regulations in practice. Meanwhile, those regulatory initiatives have produced adverse effect on market activities, making offshore listing costly, time-consuming and, in some cases, difficult or impossible. Consequently, market participants had to develop various strategies to circumvent burdensome regulatory obligations. To understand where and how government economic regulation in this area is mistaken or likely to err, it is necessary to examine the role of government in the marketplace. Based on the analytical framework of the non-market failure theory, this research found that the current regulatory framework is misdirected and unnecessary. The framework results in a very few economic gains. But more critically, it contributes to quite expensive costs based on repeated failures, thereby creating deadweight losses to society. To remedy this problem, this thesis proposes that deregulation could be a viable (and perhaps even an inevitable) alternative to overcome existing regulatory failure. I present two solutions, together with details of respective regulatory arrangement. One ideal solution is a far more radical deepening of economic liberalization that aims at removing legal restriction over offshore listing quickly. The second solution, which is more realistic and pragmatic in political terms, emphasizes the phasing out of government control in a gradual manner.

Date of Award	3 Oct 2014
Original language	English
Awarding Institution	City University of Hong Kong
Supervisor	Surya DEVA (Supervisor) & Zhen Charles QU (Supervisor)