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Ninebot IPO breathes belated life into Chinese CDRs

Does a rare CDR deal in China this month herald a kick-start for the asset class?

Ninebot president Wang Ye: loan rider or leader of the pack?

When electric scooter maker Ninebot completed the first-ever sale of Chinese depositary receipts (CDRs) on Monday (October 19), almost no one stood up and took notice.

It is nearly two and a half years since mainland regulators set out to convince foreign-registered Chinese firms to sell CDRs at home.

The State Council loved the idea. In May 2018, China’s cabinet was bullish on the outlook of a new asset class designed to mimic US depositary receipts.

During the last two decades, myriad Chinese firms have registered overseas, to skirt rules that restrict ‘foreign’ capital from investing in sensitive industries such as telecommunications and the media.

Early-era Chinese firms, including Sina, Sohu and NetEase, took advantage, adopting a variable interest entity (VIE) structure and selling shares in New York.

Regulators saw CDRs as the ideal way to convince some of these listed firms – and a few unlisted ones – to return to the motherland and hit up investors in Shanghai or Shenzhen.

Damp squib

At the time, the move made good sense.

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