(Yicai Global) April 19 -- China’s securities regulator has debunked a market rumor that a chip company can now list with net profit of only CNY20 million (USD3.2 million), state Xinhua News Agency reported today on its Viewpoint Weibo account.
The US ban against Zhongxing Telecommunication Equipment Corp. (ZTE) has aroused hot debate in China as to whether the country should promote research and development of domestically-made chips. A recent market rumor claimed China Securities Regulatory Commission will allow listings of integrated circuit companies, lowering the three-year profit threshold to CNY20 million (USD3.2 million) and immediately approve listing applications by companies without problematic governance or falsified accounting records.
China is adopting a verification system for initial public offerings and companies planning to list must submit listing applications to the CSRC, undergo its review and obtain its approval before they can go public. The process is very time-consuming and requires a minimum net profit of CNY30 million, per relevant provisions.
ZTE’s failure to fulfill certain agreements after being sanctioned by the US commerce department last year for selling telecommunications equipment to Iran and North Korea has brought down on it an export ban barring US firms from selling it parts and components, the department announced April 16. The export ban takes immediate effect and is valid for seven years. ZTE relies heavily on US component exports, above all chips for its smartphones, so the US action is likely to devastate its operations.