Chinese mainland regulators are tightening scrutiny of corporate spin-offs by publicly traded companies, aiming to suspend new stock listings, Bloomberg reported, citing people familiar with the matter.
The sources said regulators are considering blocking listed companies from spinning off their most profitable businesses, as such arrangements are unfair to shareholders of the parent company. They also want the spun-off businesses to differ from the parent's operations, to reduce business overlap and connected transactions.
Regulators will carefully review planned spin-offs listing in the mainland and Hong Kong, the sources said, with formal guidelines expected to be introduced as early as early next year.
Among them, Chinese acoustic components company GoerTek has terminated GoerTek Microelectronics’ Hong Kong listing, and Yantai Dongcheng Pharmaceutical has also halted the spin-off of its business for a Hong Kong listing. Zhejiang Shuanghuan Driveline has shelved the A-share listing of its robotics business.
The sources said discussions are still ongoing and the details of the mainland regulators' plans may change.
The report said the China Securities Regulatory Commission did not respond to a request for comment.
Some spin-off projects are still proceeding, the report noted, including Zhejiang Medicine's biotech unit NovoCodex Biopharmaceuticals and Shandong International, under Shandong Gold Mining, both awaiting regulatory approval. Meanwhile, Baidu (9888) plans to list its chip business in Hong Kong and Shanghai.
The rules, introduced in 2022, require the parent company to have recorded profits for three consecutive years and set caps on the spun-off unit’s share of the parent’s profits and assets, the report said. Regulators are now tightening enforcement to stop listed firms from rapidly raising funds during periods of strong market sentiment.
