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China unveils rules for Shanghai-London cross-listing scheme

China's securities regulator published rules covering the issuance and trading of depositary receipts between the Shanghai and London stock exchanges, allowing for the cross-listing of companies on the two bourses.

Under the rules, effective immediately, London-listed companies can issue Chinese depository receipts, or CDRs, on the Shanghai stock market and Shanghai-listed companies can issue global depository receipts, or GDRs, on the London stock market.

The issuance price for a Chinese listed company that wants to issue GDRs should not be lower than 90% of the 20-day average closing price prior to pricing.

The China Securities Regulatory Commission added that the GDRs of a Chinese listed company cannot be converted into domestic shares in 120 days following the GDR issuance, down from the six months stated in the August draft rules. In addition, depositary receipts held by controlling shareholders cannot be transferred in the 36 months following the issuance of the GDRs.

Further, the securities regulator said a single foreign investor can hold up to 10% of a Chinese listed company's total equity, while total holdings by foreign investors in a Chinese company is capped at 30%, unless it is a strategic investment.