Anticipated Growth in Chinese IPOs on NASDAQ Despite Regulatory Challenges

Zeekr, a Chinese electric vehicle (EV) manufacturer, made a strong debut on the New York Stock Exchange last month, marking a significant milestone for Chinese companies looking to raise capital on Wall Street. This marks the biggest US IPO for a Chinese company since 2021.

The US Initial Public Offering (IPO) market has been waiting to rebound after a sluggish couple of years, following a boom in 2021. However, the current landscape is not devoid of activity. Robert McCooey, vice chairman of Nasdaq and head of new listings for Asia Pacific companies, expects a "robust market" for China listings this year, with more and higher quality listings from Asia than in the past three years.

China's current rules require companies looking to list in the US and Hong Kong to get approval from the China Securities Regulatory Commission (CSRC). This process has been a challenge for Chinese companies, with heightened scrutiny by both Chinese and US regulators. Despite these challenges, the CSRC has given approval to 43 companies to list in the US this year.

The US market isn't the only destination for Chinese companies seeking to go public. China's own STAR Market in Shanghai is attracting companies such as Chinese robotics firm Unitree Robotics, which is planning an IPO. Another Chinese company, Hang Feng Technology Innovation, recently went public on the Nasdaq, but not in 2023 as initially anticipated.

The road to Wall Street isn't without its controversies. Republican senator Rick Scott wrote a letter to Nasdaq expressing concerns over allowing companies that create a national security risk to trade on its exchange, specifically mentioning Chinese lidar company Hesai. Meanwhile, Chinese fast fashion giant Shein's IPO plans have been thrust into the spotlight due to concerns about its supply chains in China and potential use of Uyghur forced labor.

Despite these challenges, McCooey is hopeful for strong listings this year. He mentioned the uptick in South Korean listings, with leading tech companies from Southeast Asia, such as Singapore's Grab and Vietnam's VinFast, being the source of major Asian IPOs on the Nasdaq composite.

As of now, 12 Chinese companies have debuted so far this year, raising at least USD 483 million. More Chinese companies are expected to go public in the US, as the US IPO market continues to show signs of recovery. However, the pace may be influenced by factors such as high interest rates and dampened investor sentiment, which slowed US listings to 54 companies last year.

This article first appeared on Nikkei Asia as part of 36Kr's ongoing partnership with Nikkei.