China has given its overseas-listed tech giants the green light to raise funds from domestic investors, also paving a way for prominent unicorns to simultaneously raise money both at home and abroad.
Certain companies listed abroad will be allowed to issue China depositary receipts, under rules detailed on Wednesday by the China Securities Regulatory Commission. CDRs are similar to the American depositary receipts used in the U.S., which represent a foreign company's equity or debt.
To be eligible, companies must have a role in China's national strategy, boast innovative technology and hold significant intellectual property. The targets include businesses involved with the internet, big data, cloud computing, artificial intelligence, high-end manufacturing and biopharmaceuticals.
The CSRC's rules impose strict criteria.
If the company is listed in Hong Kong, its market capitalization must exceed 200 billion yuan ($31 billion). If it has not listed abroad, it must be generating more than 3 billion yuan in annual revenue and have a market capitalization of over 20 billion yuan.
Alibaba Group Holding and Tencent Holdings are believed to be candidates to use CDRs to raise funds. Chinese media reports said Xiaomi, which is to list in Hong Kong next month, is also a candidate. Xiaomi's market capitalization is expected to be in the ballpark of $100 billion.
China's large internet companies have avoided listing at home due to the closed nature of the market. The government, however, wants to give domestic investors the opportunity to buy into the country's prominent technology players.