China’s securities regulator has issued a rare go-ahead for a Chinese business that is not domestically incorporated to seek a listing on Nasdaq, a development market watchers say could reassure other so-called red-chip companies considering U.S. markets.
The approval relates to DSC Holdings, a provider of operating systems for used-car dealers whose operations are based in Zhejiang province, and which is incorporated in the Cayman Islands, according to former shareholder Warburg Pincus. DSC’s investor roster listed on its website includes Ant Group and Primavera.
Last month, sources told reporters that some of these red-chip firms - entities registered abroad but owning assets and businesses in China through equity arrangements - had been instructed by Chinese authorities to move their legal domicile back to the mainland before pursuing initial public offerings in Hong Kong. That guidance fuelled concerns that a blanket prohibition might be imposed on red-chip listings outside the mainland.
Against that backdrop, the China Securities Regulatory Commission’s clearance for DSC is notable. The CSRC’s approval announced last week is its first green light to a U.S. listing application in four months and only the third approval in the most recent 12-month period.
Legal and advisory professionals interpreted the decision as a sign the regulator is resuming targeted reviews rather than applying a uniform rule. "It’s a pretty positive signal," said Ray Zhan, a Shanghai-based partner at law firm Dentons. He added that there had also been signs the commission had resumed vetting of other applications, and that the CSRC "is not taking a one-size-fits-all approach toward corporate structure, and will vet listing candidates case by case."
Financial advisors who assist Chinese firms with U.S. listings stressed the corridor to U.S. capital remains narrower than in earlier years. Yang Chongyi, who provides such advisory services, said the approval does not mark a return to the previous era of large-scale U.S. listings by Chinese companies. "The path is there, but the rules have changed," Yang said, noting that only companies with demonstrable strategy and compliance records are likely to gain traction in the U.S. market.
Listing abroad - in hubs such as Hong Kong and the United States - has long been a route for Chinese companies seeking access to deeper pools of foreign capital and relief from more onerous domestic regulatory and listing requirements. However, that option lost some appeal after Beijing introduced new rules in March 2023 requiring all Chinese firms that plan to list overseas to first obtain approval from mainland authorities.
Geopolitical tensions between Washington and Beijing have further complicated U.S. market access, a factor that has coincided with a vigorous rebound in Hong Kong initial public offerings. Funds raised through Hong Kong IPOs jumped 231% to $37 billion last year.
As of the latest CSRC data, roughly 50 mainland Chinese companies are awaiting regulatory approval to list in the United States, while more than 200 are queuing for permission to sell shares in Hong Kong. The disparity highlights the relative difficulty of U.S. listings compared with Hong Kong in the current regulatory and geopolitical environment.
Context and implications
The DSC approval illustrates the CSRC’s selective review process for overseas listing applications by China-linked firms. While not a return to previous volume levels of U.S. listings, regulators appear willing to consider individual corporate structures and compliance histories rather than imposing an across-the-board ban.