MNI: China To Attract Tech Back To A-share Listing

Recent reforms allowing Hong Kong-listed companies to seek secondary listings in Shenzhen’s A-share market will entice China’s technology giants back to the mainland, boosting capital inflows and helping mitigate geopolitical risk, advisors told MNI, noting the initiative will also facilitate cross-border capital-market connectivity.

While the Shenzhen reform guidelines do not specify which firms qualify for the so-called H+A pilot, only a handful of industry leaders are likely to meet the Shenzhen Stock Exchange’s market capitalisation, technology, and innovation capability thresholds for red-chip companies’ seeking secondary listing, said Song Ke, executive vice president at Renmin University’s Shenzhen Research Institute. He named Tencent Holdings, BYD Electronic, and Kingdee International Software as potential candidates.

Unveiled earlier this month by the State Council, the reform allowing mainland companies in the Greater Bay Area with H-shares to access a broader capital base supports China’s strategy of deepening financial integration in the region, Song added. “Differences in legal and regulatory systems remain the biggest challenge, such as issuance pricing, information disclosure, corporate governance, shareholder structure, delisting procedures, and accounting standards,” Song said.

Authorities must still clarify rules for red-chip structure conversion and coordinated investor protection across both markets, making a near-term launch unlikely, he added. However, Liu Ying, a research fellow at the Chongyang Institute for Financial Studies, expects trial programs could begin as early as Q4 2025, or by mid-2026 at the latest. Rule finalisation may take four to six months, during which potential candidates could begin preparing, she continued.

The measure would significantly lower compliance and time costs, Liu said, noting that red-chip firms previously needed to create spin-offs to pursue A-share listings.

FUND FLOWS 

Despite concerns over foreign exchange compliance, Song and Liu said H+A companies would benefit from Shenzhen’s cross-border capital pool system, which allows centralised management of domestic and foreign currency and flexible control over foreign debt and offshore lending. 

“Authorities will likely further simplify the registration process for foreign debt and overseas loans, and streamline forex settlement reviews,” Liu said. However, she cautioned that total quota limits would remain in place. 

Song noted that A-share listings could offer firms higher valuations, driven by stronger domestic brand recognition and the mainland market’s greater risk appetite for growth and technology firms – contrasting with Hong Kong’s more conservative valuation approach, which focuses on cash flow and earnings stability. H-share liquidity could also face short-term dilution as some southbound funds shift to new A-share issues, though this may be offset over time by increased foreign investment drawn to Hong Kong’s mature trading system and global market connectivity, with secondary A-share listings enhancing price discovery, he acknowledged.

Liu estimated that tech company listings under the new framework could initially draw CNY150 billion in incremental capital to A-shares, potentially rising above CNY500 billion over time. She cited likely sources as medium- and long-term investors such as pension funds, insurers, foreign safe-haven seekers, and domestic retail investors avoiding low-yield environments. In addition to enhancing capital market connectivity, the H+A initiative serves a strategic role in supporting Chinese companies facing external risks, Liu argued, noting that over 80 Chinese companies have delisted from the U.S. stock market in the past few years. (See MNI: China Advisors Hopeful Of US Trade Deal By Mid-August)