MANY overseas-listed companies in the new economy sector are considering returning to China and listing in the A-share market, as Chinese regulators give the green light to new economy companies to return to the China market.

Qihoo 360 Technology Co. Ltd.  is first one to come back to the A-share market. Founded in 2005, Qihoo 360 is a major player in Chinese internet security industry, known for its software, including antivirus software, web browsers and a mobile application store.

In 2011 the company went public in New York. In 2015, the company begun a process of privatization, which it completed in 2016 when Qihoo 360 delisted from New York Stock Exchange. Through back-door listing, the company officially listed on the Shanghai Stock Exchange on February 28 2018, becoming the first Chinese company to complete the transformation from a foreign private enterprise into a Chinese A-share company.

“As far as I know, many overseas-listed companies in the new economy sector are considering coming back to list in the A-share market,” according to Zhou Hongyi, co-founder, chairman and CEO of Qihoo 360.

The process of new economy companies coming back to China is in line with the country’s national strategy of economic restructuring. Chinese regulators are giving the green light to companies in new economy sectors. Qualified unicorn companies in biotechnology, cloud computing, AI, and high-end manufacturing enjoy priority for IPOs, according to a notice from China Securities Regulatory Commission (CSRC).

In China, a company can wait for as long as one to two years before its submission for an IPO is reviewed. However, according to CSRC’s announcement on March 4, Foxconn’s IPO submission review will start this Thursday (March 8), cutting the waiting period to two weeks.

With the favourable new rules, more Chinese technology companies including Baidu, JD.com, NetEase and Sogou have shown interest in coming back to A-share market.

On March 3, Chinese media revealed a list of companies that are allowed to come back to the China market using Chinese Depository Receipts (CDRs). CDRs are a type of depositary receipt issued by Chinese banks. They allow overseas-listed companies to deposit their foreign equity with Chinese banks so that the equity can be traded in the A-share market. Foreign companies can use CDRs to allow both Chinese institutional and private investors to own their stock.

In addition to Chinese Internet giants like Baidu, Alibaba, Tencent, and JD.com, major Chinese tech players Weibo, NetEase, Ctrip, and Sunny Optical Technology are also on the regulator’s list, according to Chinese media.

Many of the major players in China’s new economy sector have gone public in overseas bourses due to policy restrictions in China.

“We definitely hope to come back to mainland China’s stock market as soon as possible, anytime when the policy allows us to come back,” says Robin Li, co-founder and CEO of Baidu. In fact, as early as 2015, Li said Baidu would quit the US market and come back to the A-share market. The majority of Baidu’s users are in China, the company’s market is mainly in China, and ideally the company’s major shareholders should be in China as well, according to Li.

Baidu chose to list in the US because the company is considered a foreign enterprise due to its variable interest entity (VIE) structure. This is one of the major problems that new economy companies face when listing in China. CDR can help companies overcome this obstacle, although whether companies will choose to list directly as A-shares or favour CDRs is yet to be seen.