What is a red chip company?

Red-chip enterprises refer to companies registered outside the mainland of China, which are controlled by government agencies in China and need special approval from the State Council. Overseas non-state-owned enterprises approved by HKEx refer to companies registered outside the mainland of China and controlled by mainland individuals. Overseas companies usually go public by way of return investment.

Foreign mergers and acquisitions need the approval of the Ministry of Commerce; Need to register with the State Administration of Foreign Exchange; The overseas listing of SPV must be approved by the State Council Securities Regulatory Authority; Need to be audited by the Hong Kong Stock Exchange.

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Compared with H-share listing, the Hong Kong Securities Regulatory Commission has looser supervision on red-chip listing and lower listing cost. In addition, the ability to refinance after listing is stronger. Six months after listing, enterprises can issue new shares and raise funds again.

Listed in the form of red chips, it is much easier for the original shareholders to cash out than H shares (listed on the main board of Hong Kong, the major shareholders can sell the shares listed in their prospectus and actually owned after six months of listing).

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