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A single stone stirs up a thousand waves. Recently, the State Council issued the Regulations on Regulating the Services Provided by Intermediaries for Public Issuance of Stocks by Companies (Draft for Comments) (hereinafter referred to as the Regulations), which has attracted widespread attention and discussion in local government financial departments.

Among them, the most focused clause is that local governments will stop rewarding companies for listing. Securities Times reporters found that there are incentive policies for companies to go public everywhere, ranging from millions to tens of millions of yuan, and multiple levels of government are superimposed. If this incentive policy is stopped, it will trigger a wave of policy adjustments in various places.

However, the mainstream view holds a positive evaluation. "Canceling the listing reward does not mean that companies will no longer be encouraged to go public, but it prevents vicious competition, improves the overall quality of listed companies, and truly serves the development of the real economy and technological innovation." Tao Qingyang, assistant researcher at the Institute of Technology and Standards of the China Academy of Information and Communications Technology, said in an interview with a Securities Times reporter.

Many places have suspended the issuance of listing subsidies

On August 16, the Ministry of Justice announced that it had jointly drafted the "Regulations" with the Ministry of Finance and the China Securities Regulatory Commission and was open to public comments from August 16 to September 15. This document, which aims to regulate the services of IPO intermediary institutions, has attracted great attention from local government financial departments because of Article 10, which states that local governments at all levels shall not give rewards to issuers or intermediary institutions based on the results of public issuance and listing of stocks.

The head of a financial department in a city in Zhejiang said in an interview with a Securities Times reporter: "We plan to temporarily put related matters on hold and wait for the regulations to be officially released before making a decision. If the policy has restrictions, the originally planned rewards will be canceled." In addition, the head of a financial department in a city in Jiangsu Province also revealed to reporters that once the policy is clarified, they will resolutely implement it.

Securities Times reporters interviewed financial departments in six different provinces and cities and found that their current practices were basically the same: they all chose to temporarily suspend the issuance of subsidies for corporate listings, waiting for the formal issuance of the "Regulations". If the cancellation is confirmed, the listing incentive policy will be adjusted accordingly.

According to Article 16 of the Regulations, if a local people's government violates Article 10 and gives rewards to issuers or intermediary institutions, the rewards shall be recovered and the relevant authorities shall impose penalties on the responsible leaders and directly responsible persons in accordance with the law.

Many places have competed to promote IPO reward and subsidy policies

The number of listed companies has always been considered a barometer of regional economic development and a "gold standard" for measuring high-quality economic development. For local governments, the listing of companies can not only attract a large amount of capital inflows, but also create jobs and tax revenue for the local area. Therefore, over the years, various regions have competed to introduce incentives and subsidies for corporate listings, and have invested heavily to stimulate corporate enthusiasm for listings.

Take Zhejiang as an example. As early as October 2017, Zhejiang was the first province in the country to launch the "Phoenix Action" to encourage companies to go public, and to coordinate the promotion of corporate share reform, listing, cultivation and guidance. The latest version of the "Phoenix Action" (2021-2025) clearly requires all localities to formulate and improve support and incentive policies for corporate share reform, listing, listing, mergers and acquisitions, and continue to include the "Phoenix Action" plan in the Zhejiang Provincial People's Government's supervision and incentive matters.

Anhui has launched the "Welcome Pine Action" for companies to go public, proposing support policies in terms of strengthening professional guidance, promoting listing compliance, and accelerating the pace of listing according to the stage of listing of companies. Among them, the provincial finance department will reward and subsidize 1.6 million yuan for companies that have registered for listing guidance; and 1.6 million yuan for companies that have applied for listing, which will be supplemented to 4 million yuan after successful listing.

Based on the keywords "listing rewards and listing subsidies" from Wind Information, the reporter made a rough statistical analysis of the listing rewards and subsidies received by listed companies in the past three years (2021 to 2023) and found that in the 2021 annual report, a total of 347 listed companies disclosed that they had received listing rewards, with a total amount of 1.226 billion yuan. Among them, there were 21 listed companies with a single listing reward of more than 10 million yuan, and Sanmei Co., Ltd. received as much as 32.73 million yuan. The listing rewards received by Gongtong Pharmaceutical, Yingfeng Co., Ltd., and Beiyuan Group also exceeded 20 million yuan (inclusive).

In the 2022 annual report, a total of about 280 listed companies disclosed that they had received listing subsidies, with a total amount of more than 860 million yuan. Among them, there were 11 listed companies that received listing subsidies of more than 10 million yuan. Mankun Technology received the highest listing reward, with three awards totaling 18 million yuan. Companies such as Xinanjie and Inner Mongolia Xinhua also received listing subsidies of approximately 14 million yuan.

In the 2023 annual report, only 27 listed companies disclosed that they had received listing subsidies, with a total amount of 78.8851 million yuan. Only one company exceeded 10 million yuan, which was Knight Dairy, with 20.5 million yuan.

The competition for IPO subsidies is getting more intense

The original purpose of IPO incentives was to reduce the listing costs of enterprises and increase their enthusiasm for listing. However, as the competition for IPO resources has become increasingly fierce, the competition for incentives has also intensified.

In order to compete for listing resources, different regions in the same province have different amounts of rewards and subsidies for enterprises. Taking Zhejiang as an example, Yiwu's reward and subsidy policy for enterprise listing is divided into direct listing rewards and initial public offering fundraising rewards, with a total amount of up to 20 million yuan; Yuyao adopts a phased reward, 2 million yuan after listing guidance filing; 4 million yuan for submitting IPO application materials and being accepted by the China Securities Regulatory Commission or the Shanghai and Shenzhen Stock Exchanges; and 2 million yuan for successful initial public offering.

Jiangxi is the province that provides the most generous subsidies for companies going public. Take Ganzhou Economic Development Zone as an example. On top of the provincial and municipal government's related incentives, the district government will also give companies a 30 million yuan reward. Yingtan will reward local companies with 10 million yuan and 15 million yuan respectively from the municipal government and the beneficiary government for their initial public offering on the A-share market, from the start of the shareholding reform to the successful listing.

"Listing incentives may trigger unfair competition among local governments, which will not only increase the fiscal burden, but also interfere with the normal business decisions of enterprises, causing them to relocate based on higher incentives rather than optimal efficiency, leading to resource misallocation and unbalanced regional economic and social development." Tao Qingyang told reporters.

Among the top three provinces with the most A-share listed companies (Guangdong, Zhejiang and Jiangsu), taking 2022 as an example, the reporter roughly estimated that 42 listed companies in Guangdong received listing subsidies, with a total amount of 70.73 million yuan, the highest of which was 6 million yuan; 52 listed companies in Zhejiang received listing subsidies, with a total amount of 134 million yuan, the highest of which was 10.3 million yuan; 33 listed companies in Jiangsu received listing subsidies, with a total amount of 99.4546 million yuan, the highest of which was 9.2068 million yuan.

From "reward and subsidy" to "service-oriented"

Tao Qingyang said that the policy of canceling IPO incentives for local governments is in line with the recently implemented "Fair Competition Review Regulations" and can be seen as aimed at promoting the transformation of various regions from competing for preferential policies to competing for the business environment.

If the "Regulations" decide to cancel the listing incentives, it can to some extent reduce the phenomenon of local governments blindly pursuing corporate listings, and strive to allow companies that have broken through key core technologies and have high market recognition to go public, thereby improving the quality of listed companies from the source, and thereby strengthening the capital market's value discovery and resource allocation functions, truly serving the real economy and scientific and technological innovation.

In the view of industry insiders, local governments should shift from "rolling rewards and subsidies" to "focusing on services" and return to supporting the high-quality development of local enterprises, allowing corporate IPOs to be a natural outcome rather than being oriented towards listing.

The reporter noticed that many local governments have proposed a series of measures to support companies going public from the service aspect. The upgraded version of "Pujiang Light" released by Shanghai recently pointed out that it encourages each district to establish a system of special managers for listed companies, improve the regular visit mechanism for companies planning to go public and listed companies within the jurisdiction, support each district to build a capital market service base, and provide "one-stop" services for companies within the jurisdiction to connect with the capital market.

In the "Several Measures on Consolidating and Enhancing the 'Leader' Brand and Promoting the Cultivation of Enterprises for Listing" issued by Guangzhou at the beginning of this year, it was also pointed out that a database of potential listed companies will be established, and the companies to be listed will be divided into a cultivation layer, a preferred layer and an application layer according to dimensions such as company size and listing stage. Professional consulting, capital market training and guidance, financing matching and other services will be provided to the companies in the database. Relevant functional departments will promptly resolve and provide feedback on historical problems encountered in the restructuring and listing of enterprises, and land use and environmental impact assessment issues during the implementation of fundraising and investment projects.