(Bloomberg) -- China’s trial program for encouraging technology giants like Alibaba Group Holding Ltd. to list their shares at home is drawing positive early reviews, a sign their stocks may soon be available in the world’s most populous country.
Lei Jun, co-founder and chief executive officer of smartphone maker Xiaomi Corp., voiced support for the effort to allow companies to issue Chinese depositary receipts in addition to shares traded abroad. His company is said to be preparing an IPO that could be the biggest since Alibaba’s $25 billion debut in 2014.
"It is an excellent idea, a great policy innovation," said Lei in an interview, while declining to comment on specific IPO plans or whether the company would list its own CDRs.
China is now home to some of the world’s fastest-growing and most valuable technology companies, but Tencent Holdings Ltd., Alibaba and Baidu Inc. have all gone abroad for their IPOs. The CDR effort is aimed at bringing such shares into the home market, where local consumers who know their products may boost valuations. China’s State Council unveiled the pilot program Friday, less than a month after the idea was first made public -- underscoring the government’s enthusiasm.
The CDR trial would apply to companies that went public overseas and have a market value of more than 200 billion yuan ($32 billion). It also includes an easier path to listing for private companies that are valued at more than 20 billion yuan and have revenue of 3 billion yuan, as well as fast-growing unlisted companies that work in the field of advanced technology and have a leading advantage in their sector.
E-commerce giant Alibaba also expressed support for the idea of CDRs, but is awaiting more clarity on the new program.
“Since our IPO in the US, we have stated that if regulations allow, we would consider a listing in China,” said Katie Lee, a spokeswoman for Alibaba.
Analysts at China International Capital Corp. estimate that 35 foreign-listed and private companies may qualify, with prospects that they’ll raise as much as 1.5 trillion yuan in financing. The report identifies Xiaomi, Alibaba-affiliate Ant Financial, ride-hailing leader Didi Chuxing and food delivery giant Meituan Dianping among the startups that may be part of the program.
Companies including Hong Kong-listed Tencent and New York-listed Baidu have already said they will consider such a move. During the National People’s Congress in Beijing last month, several companies expressed support for domestic listings, including Netease Inc. and 58.com Inc.
Lei said that one reason China’s technology companies have listed abroad is because their venture backers invested in dollars. In order for those firms to return money to their limited partners, they needed to list overseas. The CDR program would address that issue by allowing dual listings in the mainland and abroad.
"Some of the innovative startups are backed by U.S. dollar nominated funds and previous regulations made the Chinese mainland listing impossible or very difficult to do,” said Lei. “CDRs offer an opportunity for those unicorns and super unicorns (to be listed in China)."
He declined to comment on whether Xiaomi is preparing to list its own CDRs.
Xiaomi, with earlier investors including Qualcomm Ventures and IDG Capital, is said to be preparing its own IPO as soon as this year -- most likely in Hong Kong. It has selected Morgan Stanley, Goldman Sachs Group Inc. and other international banks as underwriters of an IPO that could value the company at as much as $100 billion.
The world’s fifth-largest smartphone vendor is aiming to take on Apple Inc. and Samsung Electronics Co. with devices packed with top-end components at lower prices than its competitors. So far it has focused mainly in developing markets, although the company has said it would target the U.S. market in the future.
©2018 Bloomberg L.P.
With assistance from Gao Yuan, Shelly Banjo