Alibaba IPO a caveat for regulators

Given the not-so-market-savvy management of the A-share market, it is not surprising that Ma did not choose Shanghai or Shenzhen to launch the IPO. According to the licensing system of the A-share market, most Chinese IT companies, including Tencent and JD.com in their initiative years, were not qualified for listing going by their profit margins, growth and assets size. Moreover, an A-share listed company's refinancing avenues are strictly limited and expensive, whereas a US-listed enterprise continues to enjoy a wide range of financing options.

Perhaps worse, the China Securities Regulatory Commission has been overcautious in managing the domestic stock market, especially when it comes to approving IPOs. Quite a few large private companies in China are not even close to getting listed despite being in business for years and investing huge amounts of capital. For an Internet giant like Alibaba, which requires massive financing, it would have been even more difficult to fight over the IPO under current market policies.

Alibaba's listing in New York somehow reflects that China's stock market is no longer suited to meet the demands of the country's economic growth. Essentially, the auditing system for listed Chinese enterprises, which controls companies' entry to the stock market, is nothing but a means to ensure the survival of the weakest. Also, by seeming to lose the grip on advanced technologies and changing business modes, the CSRC-led auditing system creates a big problem for investors and enterprises alike. And it is because of such restrictions that an increasing number of companies from emerging industries have to plan their listing overseas, leading to considerable financial loss and public rage.

Therefore, the CSRC has to work out an auditing system that would allow the market to decide which companies could be listed in China. In fact, this should be the CSRC's principal urgent task, because as administrative supervisor of the market, it is supposed to focus on law enforcement, and not decide the fate of companies and bourses.

The author is a professor at the School of International Trade and Economics, University of International Business and Economics, Beijing.