The Standing Committee of the National People Congress (NPC), the top legislature, will consider later this week the adoption of a proposal to overhaul the country's IPO process and shift toward a market-oriented registration system, media reports said Tuesday.
The NPC announced on Tuesday that it would hold a meeting next week in Beijing to consider a number of legislative drafts, including a proposal to authorize the State Council, China's cabinet, to adjust regulations in line with the securities laws in the implementation of an IPO registration system, the Xinhua News Agency reported on Tuesday.
Authorities in China have been discussing for some time the adoption of an IPO registration system that would let the market play a larger role in deciding if companies are qualified for listing because the current system is obsolete, according to a report by the State broadcaster China Central Television (CCTV) in June.
The current system requires companies wanting to float shares to obtain approval from the China Securities Regulatory Commission.
Under the registration system, which is used in mature equity markets such as the U.S., companies would only need to register with stock exchanges to conduct IPOs and market participants would make their own decisions on the merits of an offering, according to the CCTV report.
Although the stock market has responded positively to the idea of shifting to a registration system, the proposal has also fueled fears among some investors that many companies could rush to the market for fundraising simultaneously, Reuters reported on December 9.
However, regulators said the reform will be gradually implemented over a 2-year period, and the IPO "floodgates" would not be opened at the same time, the Reuters report said.
