Since financial reforms and the opening of mainland markets within the Nineteen Eighties, mainland Chinese language firms have lengthy wished to boost funds by the issuance of shares and bonds to overseas buyers. Even because the nation’s home progress peaks, mainland Chinese language firms are more and more pursuing offshore listings to entry swimming pools of overseas capital backed by laborious (totally convertible) currencies such because the US greenback.
This publish builds on our earlier evaluation of the IPO resurgence within the Hong Kong particular funding market. This text examines the broader forces behind this phenomenon, together with regulatory modifications, tensions between the USA and China, and the way reforms to the Hong Kong Alternate and Clearing Restricted (HKEX) will reshape international capital flows and convey mainland Chinese language listed shares again to the Hong Kong Particular Administrative Area.
By 2025, greater than 300 mainland Chinese language firms have listed abroad, elevating a complete of lots of of billions of {dollars}. In 2020, the final peak for IPOs, amid the coronavirus pandemic, Hong Kong exchange-listed firms raised about $50 billion from IPO proceeds, primarily by secondary listings on the Hong Kong market by mainland Chinese language expertise giants JD and NetEase, which had been already listed in the USA.
From Wall Avenue to the Heart: How China’s Capital Flows Are Rebalancing
For many years, international IPO exercise has been dominated by the NYSE and NASDAQ, which collectively have a market capitalization of greater than $50 trillion. Ranked #1 and #2, these U.S. exchanges have a mixed market capitalization of greater than the opposite prime 10 inventory exchanges on the earth. Actually, for many years, the NYSE and Nasdaq have dominated the worldwide IPO market. The USA has a mixture of structural, financial, and institutional benefits that appeal to international firms, together with these from mainland China, and these firms have constantly demonstrated a robust want to checklist in the USA.
Regardless of dropping out to the US market in each issuance quantity and income, HKEX stays one of many world’s main inventory exchanges, continuously ranks among the many world’s prime three exchanges by way of IPO income, and is arguably the regional gateway to the Higher China market.
Mainland firms searching for offshore capital are usually confronted with a selection between the USA (NYSE/Nasdaq) and the Hong Kong Particular Administrative Area (HKEX). The U.S. market has typically been a favourite, particularly for high-tech and progress firms, as a consequence of its international profile, valuation premium, and considerable liquidity.
Mainland Chinese language firms not often think about main inventory exchanges in different markets, such because the UK, mainland Europe, India or Japan, as a consequence of a mixture of things similar to investor unfamiliarity, valuation disadvantages, cultural boundaries and political components.
Supply: SEC, HKEX, LSEG. Notes: 1. The USA consists of each the NYSE and Nasdaq. 2. Income consists of solely IPO issuances excluding transfers and introductions.
For international buyers, this rebalancing means new entry factors to mainland China’s progress, however by markets extra carefully tied to home coverage and liquidity cycles.
Regulation, threat and restructuring
The trail to overseas capital in mainland China has modified basically over the previous decade, formed by deepening U.S.-China tensions and a brand new layer of regulation. Mainland Chinese language firms now face stricter necessities for accessing US capital markets. Consequently, the variety of new listings by mainland Chinese language firms on US exchanges was virtually halved, from 19 within the first half of 2023 to 11 within the first half of 2025.
Passage of the International Holding Firm Legal responsibility Act (HFCAA)[1] The 2020 U.S. delisting was a landmark occasion, because it forces overseas firms to be delisted from the U.S. market in the event that they fail to adjust to the PCAOB’s inspection of their audit paperwork.
Nonetheless, mainland China’s nationwide safety legislation prohibits sharing sure monetary and operational info with overseas firms. For instance, information safety legal guidelines in mainland China[2] It imposes strict controls on cross-border information transfers, that are in direct battle with U.S. necessities.
The mixed results of regulatory boundaries, a wave of delistings, and geopolitical uncertainty are inflicting a restructuring of worldwide capital markets. Moreover, the growing reputation of personal market financing within the US has additional lowered the attractiveness of going public.
International PE funds raised $424.6 billion within the first half of 2025, already exceeding the 2024 whole. To date, solely a small portion of mainland Chinese language firm delistings have resulted from PE acquisitions in comparison with pressured delistings. Nonetheless, larger flexibility, confidentiality, lowered disclosure necessities, and strategic management make non-public markets a gorgeous new different.
This transformation shouldn’t be non permanent. It is a structural readjustment of how firms go public, how buyers worth them, and the way capital flows. As US-China decoupling deepens, HKEX is positioning itself as a brand new gateway to mainland China’s international ambitions.
Buyers might want to adapt as mainland Chinese language fairness funding area shifts from ADR to Hong Kong SAR listings, reshaping liquidity, governance and valuation dynamics.
Desk: Notable delisting of China Corps on US exchanges.
Supply: SEC, NYSE, Nasdaq.
Reinventing the Gateway: HKEX’s Structural Benefit
The Hong Kong Alternate’s current reforms construct on its long-standing benefits of proximity and coverage alignment with the Hong Kong Alternate, making it a pure vacation spot for mainland Chinese language listings.
Inventory Join was developed and launched by HKEX, China Alternate and China Clear in 2014 to create a reciprocal market entry system between mainland China and Hong Kong Particular Administrative Area. It will allow mainland Chinese language buyers to commerce Hong Kong SAR shares by native brokers, considerably growing liquidity and valuationability, and preserving home protection for mainland Chinese language firms listed within the Hong Kong SAR.
These modifications have made HKEX not solely the itemizing venue of selection for issuers, but additionally an more and more vital conduit for buyers searching for diversified publicity to mainland China’s innovation economic system.
Mainland Chinese language firms have lengthy favored U.S. exchanges with twin class share buildings that permit them to take care of management whereas elevating capital. In 2018, HKEX launched weighted voting rights for progressive firms, offering equal flexibility and eliminating regulatory arbitrage.
Moreover, HKEX’s sectoral give attention to biotechnology, high-tech and inexperienced power firms, other than its cultural and geographical proximity to mainland China, is strategically aligned with the mainland Chinese language authorities’s efforts. These components, mixed with current structural reforms, have remodeled HKEX into the de facto venue of selection for mainland Chinese language firms searching for worldwide enlargement.
The brand new face of Chinese language IPOs: Classes from CATL
The surge in IPOs on Hong Kong exchanges within the first half of this yr is the end result of a regulatory panorama, structural reforms and geopolitical developments, and a brand new chapter in how mainland Chinese language firms entry and increase worldwide capital.
Essentially the most notable listed firm on this rising Hong Kong IPO atmosphere is CATL. On Might 20, Mainland China battery big Hyundai Amperex Know-how Co., Ltd. (CATL) accomplished the world’s largest IPO this yr, elevating $5.2 billion on HKEX. The IPO was oversubscribed and CATL exercised its overallotment possibility as a consequence of sturdy demand. Nearly all the proceeds had been used for European enlargement, together with an 8.2 billion euro battery manufacturing unit in Hungary.
CATL’s A+H itemizing technique has paid off. The corporate’s shares are priced at a premium to the Hong Kong alternate, reflecting sturdy confidence from worldwide buyers. This IPO clearly demonstrated the dynamics of the brand new chapter of HKEX IPO, wherein the mainland Chinese language high-tech big took benefit of HKEX’s structural reform and sector focus to advertise worldwide enlargement and efficiently raised massive quantities of capital by A+H itemizing.
Together with CATL, HKEX hosted 4 of the world’s 10 largest IPOs within the first half of this yr. Income of $14 billion recorded 723% year-on-year progress, outpacing all different international exchanges. Moreover, HKEX has 207 lively itemizing candidates for the second half of 2025, suggesting sturdy momentum and market optimism. For the primary half of 2025, HKEX reported gross sales and different revenue of HK$14.08 billion, up 33% year-on-year, and internet revenue of HK$8.52 billion, up 39% year-on-year. As a key indicator of market liquidity, common each day turnover reached HK$240.2 billion, a rise of 118% year-on-year.
Past the increase: Focus threat and what occurs subsequent
However behind the file IPO surge lies a extra advanced actuality that exposes the Hong Kong Particular Administrative Area’s rising dependence on mainland China. At present, mainland Chinese language firms account for about 80% of the market capitalization of the Hong Kong alternate. This stage of focus has vital implications for mainland China’s financial cycles, regulatory modifications, and coverage regimes. Moreover, there may be growing integration into mainland China’s governance and the institutional framework of the Hong Kong Particular Administrative Area.
Moreover, many IPOs are bullishly priced, making them weak to post-IPO efficiency. The Hold Seng Index has risen greater than 20% because the starting of the yr, however many imagine this progress is pushed by an inflow of short-term liquidity quite than sustainable financial fundamentals. This momentum will largely depend upon continued regulatory assist, investor confidence and secure macroeconomic situations.
It’s clear that for portfolio managers, the return of the Hong Kong Particular Administrative Area expands alternatives, but additionally will increase correlation dangers. The important thing can be to differentiate between cyclical restoration and structural restructuring.
References
Bloomberg New Economic system: China’s prime economist says Beijing simply desires respect – Bloomberg
The Way forward for Investing: 2024/25 Version – Overview | Franklin Templeton Institutional
PCAOB secures entry to full inspections and investigations of Chinese language firms for the primary time in historical past | PCAOB
Chinese language firms listed on main US inventory exchanges
Chinese language battery big CATL is increasing globally: This is why it issues
Hong Kong ECM state of affairs within the first half of 2025
Hong Kong’s IPO increase picks up once more: Inside the primary half’s $14 billion surge and what’s driving it
Non-public fairness funding to extend in 1H 2025, more cash on IPO exit | S&P International
Hong Kong Alternate’s gross sales and earnings soared greater than 30% within the first half, inventory value soared 50% because the starting of the yr – RMB traits
[1] International Company Legal responsibility Act: The HFCAA was enacted on December 18, 2020 as Public Legislation 116-222, amending the Sarbanes-Oxley Act of 2002. A legislation that holds overseas firms accountable.
[2] China Information Safety Legislation: The Information Safety Legislation of the Folks’s Republic of China, enacted on June 10, 2021, mandates a labeled and labeled information safety system for “important” and “core” information and creates authorized legal responsibility for any threats to “nationwide safety.”
