Since the introduction of the new “Guo Jiu Tiao” in mid-April, the number of “iron roosters” (companies that make profits but do not distribute dividends) has decreased significantly. According to CCTV, based on corporate disclosures of 2023 annual reports, 230 listed companies plan to distribute interim dividends. At the same time, there have been changes in the capital market. This year, 20 companies have delisted, delisting warnings are still ongoing, and about 154 companies have withdrawn IPO applications.
The new version of “Guo Jiu Tiao” puts forward new norms for the issuance, listing, trading and delisting systems of the capital market, listed companies, industry organizations, long-term investors and other market participants, as well as the self-construction of supervision, market reform and deepening opening-up requirements, etc. The overall tone is “strict”.
Effects of the New “Guo Jiu Tiao” in Mainland China
The new regulations stipulate that the supervision of cash dividends of listed companies should be strengthened, the stability, continuity and predictability of dividends should be enhanced, and dividends should be distributed multiple times a year and before the Spring Festival. In late April, the Shanghai and Shenzhen Stock Exchanges specifically revised the “Stock Listing Rules” to further strengthen the mandatory dividend provisions.
In the 2023 annual reports, a total of 3,635 listed companies on the Shanghai and Shenzhen Stock Exchanges announced dividend distribution plans, accounting for over 70%, with a year-on-year increase of over 10%; the total cash dividend amounted to RMB 2.2 trillion (about NT$10 trillion), a year-on-year increase of 4%. The number and amount of dividend-paying companies both hit record highs.
Zhang Gang, chief analyst of Southwest Securities, pointed out that many companies have formally incorporated interim dividends into the articles of association of listed companies as a system. This will help to improve the investment return for shareholders and attract more long-term funds from both domestic and foreign investors.
The new regulations strengthen the first responsibility of issuers and the “gatekeeper” responsibility of intermediary institutions, strictly investigate illegal and irregular issues such as fraudulent issuance, and rectify market irregularities such as high-priced super-raised funds and concerted price suppression. The strict delisting regulations have made many companies preparing to go public retreat.
According to incomplete statistics of Oriental Fortune Choice data by Economic Herald, as of the 22nd, 154 companies have withdrawn IPO applications this year, including 29 on the main board of the Shanghai Stock Exchange, 23 on the Science and Technology Innovation Board, 22 on the main board of the Shenzhen Stock Exchange, 41 on the Growth Enterprise Market, and 39 on the Beijing Stock Exchange.
In addition, the new regulations also refine the delisting rules, especially targeting the fight against financial fraud and internal control failures. As of the 15th, 25 companies on the A-share market have been locked in for delisting this year.
The number of companies with delisting risk warnings has also increased significantly. According to Cailian, 46 A-share listed companies have been “capped” since May. The reasons for these capped companies are inseparable from operating losses, inability to issue financial statements, uncertainties in operating capabilities, and false information.
The China Securities Regulatory Commission (CSRC) has issued regulations on the reduction of shares by shareholders under the “Guo Jiu Tiao”, which stipulates that the identity management of major shareholders should be strictly implemented, and the reduction requirements for controlling shareholders and actual controllers should be further clarified to prevent the use of identity, transactions and tools to circumvent reduction. It is considered by the market to be the strictest in history.