Chinese IPO Overview

China is one of the largest financial hubs in the world, and the China IPO market is quite active as a result. The Chinese IPO market is comprised of three main exchanges; the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and the Hong Kong Stock Exchange (HKEX). Each of these markets serves a different purpose and are usually most popular for specific types of IPOs. This article will evaluate the Chinese IPO market, past performance and history, and the IPO outlook for 2025.

Overview of the Type of Markets

The Chinese capital market first began with the Shanghai Stock Exchange and the Shenzhen Stock Exchange in the 1990s. The China Securities Regulatory Commission (CSRC) was then established in October of 1992 to regulate the security market and monitor all listed companies. The Shanghai and Shenzhen exchanges are similar but cater to different companies looking to IPO. The Shanghai Exchange is primarily for large, established state-owned enterprises. The Shenzhen Exchange is more focused on technology and high-growth firms. Both stock exchanges offer two types of shares: A-shares, which are traded in renminbi (RMB) and mainly available to domestic investors, and B-shares, which are traded in foreign currencies (U.S. dollars in Shanghai and Hong Kong dollars in Shenzhen) and were created to attract foreign investors. Thus, A/B share distinctions are more about investor access, currency, and trading venues — not typically about differential ownership or voting rights as in Western “Class A / Class B” shares. This system shows China’s gradual efforts to open its markets to international investment while maintaining strong domestic control. By the end of 2023, there were a total of 5403 companies listed in the China capital market, and a total market value of approximately RMB 73 trillion (approximately 10 trillion USD).

Chinese IPO Process Overview

The process to IPO in China typically involves four stages. The first stage usually lasts at least six months and will involve the completion of the intermediaries’ due diligence and addressing any issues arising from the due diligence. During the first stage, the company will also conduct a shareholding reorganization, prepare the application documents, and clear the tutoring examination conducted by the local offices of the CSRC.

Stage two involves the exchange’s evaluation of the issuer; the exchanges usually conduct two or three rounds of inquiries. After the inquiry process, a hearing is held and for issues with special issues, a non-site inspection may be required. These special issues can include irregular or opaque-related-party transactions, past business deals lacking transparency, anomalies in financial statements, or ownership and governance concerns. In total, this stage usually lasts six to twelve months.

Stage three is the registration phase with the CSRC. Under China’s registration-based IPO system, once the stock exchange has completed its review and submitted its opinion, the CSRC has a statutory limit of 20 working days to decide whether to accept or reject the registration (i.e. allow the company to proceed). However, in practice, the timing may depend on whether the submitted materials are fully compliant and whether further clarifications are required.
The final stage is to complete the public offering and listing. After the CSRC gives its registration consent, this stage typically takes two to three months to execute, including the sale of shares, allotment, and commencement of trading.

‍Chinese Capital Market Overview

China’s capital market is integral to industrial policy and national strategy. However, IPOs in China remain difficult. For example, in the A-share market (i.e. shares denominated in RMB and listed on the Shanghai or Shenzhen exchanges), there is no mechanism for direct listings or SPACs. Although reverse mergers are technically allowed, companies must still go through the same IPO procedures, so the process is almost as onerous as a traditional IPO. Furthermore, a clear pattern arises when evaluating the types of companies that IPO on Chinese exchanges. In his honors thesis, NYU Stern student, Jiaye Shen lists five patterns that emerge when companies choose to list. He explains the five patterns to be, “Chinese technology, media, and telecom (TMT) companies prefer US IPOs, Chinese industrial companies prefer China IPOs, valuation differences across destinations have limited impact on listing choice, Chinese companies with positive net income at issue prefer China IPOs, and IPO offering size has limited impact on listing choices.” These observations present patterns when companies choose to remain within China and list there versus companies that go to the United States to list.

Past Performance and Outlook

In Deloitte’s 2024 Review and 2025 Outlook for Chinese Mainland and HK IPO markets, Dick Kay, National Offering Services leader of theCapital Market Services Group, is quoted saying, "The State Council’s nine new measures and related initiatives introduced since April 2024 have resulted in a slower pace for A-share IPOs than in 2023. To ensure a high-quality capital market for the country in the longer run, we expect these measures and initiatives to carry forward into 2025. Government support for the technology and innovative sectors and quality first philosophy will help lift the performance of the IPO market in 2025”.

An analysis by EY titled “How do you find the clarity to illuminate your path to IPO?” characterizes trends in the Chinese mainland IPO market. The article presents that the Chinese mainland regulatory measures enhanced IPO quality which led to 100% profitable IPOs in Q1 2025. The article also shows that 100% of IPO’s saw positive first-day returns in Q1 2025.

According to Deloitte’s 2024 Review & Outlook, the Chinese mainland A-share market was projected to record 101 IPOs raising RMB 68.0 billion in 2024, compared to 313 new listings raising RMB 356.3 billion in 2023. This represents reductions of 68% in deal volume and 81% in deal size. Furthermore, Deloitte presented that in Q1 of 2025, only twenty-seven IPOs were completed raising RMB 16.3 billion compared with 30 IPOs raising RMB 23.6 billion in Q1 2024. This represents a 10% reduction in the number of IPOs and a 31% slip in proceeds, Deloitte assigned the cause of this slower pace to the continuous implementation of new capital market measures and heightened scrutiny over the entire capital market.

In KPMG’s published 2025 A-share IPO market outlook for Chinese stock exchanges, Irene Chu, the Head of New Economy and Life Sciences for KPMG China explains, “A-share IPO activity is expected to remain stable as Chinese Mainland shifts its focus to strengthening the quality of listed companies, aiming to improve the overall capital market. Chinese enterprises looking to go public may shift their attention to Hong Kong, which continues to offer strong connectivity to the A-share market through the Stock Connect program and provide valuable access to global investors through its position as an international financial center.”

Conclusion

In conclusion, the Chinese IPO market is a vibrant yet complex landscape, shaped by the distinct roles of the Shanghai, Shenzhen, and Hong Kong exchanges. While the IPO process plays a crucial role in China's industrial policy, the process of going public can be challenging due to strict regulations and limited options for direct listings or SPACs. The market's performance has been influenced by global economic trends, with Chinese companies often choosing between domestic and international listings based on factors like valuation and regulatory environments.

Looking ahead to 2025, there is a focus on enhancing the quality of listed companies, with Hong Kong emerging as an attractive option for Chinese enterprises seeking global investor access. Overall, the Chinese IPO market presents both opportunities and challenges, reflecting broader shifts in global finance and economic policy.

Resources Consulted:

Global Legal Insights – IPO Laws and Regulations in China

NYU Stern – Chinese IPO Thesis by Jason Shen (2016)

KR Asia – Uncertainties Cloud China’s 2025 IPO Prospects

KPMG – China and Hong Kong IPO Markets: 2024 Review and 2025 Outlook

Deloitte – 2024 Review and 2025 Outlook for Chinese Mainland and HK IPO Markets

Deloitte – Mainland and HK IPO Markets in Q1 2025

EY – Global IPO Trends