Publicly listed companies can be administratively forced out of the Chinese securities market. In an effort to focus the development of PRC securities markets, the Measures for the Suspension and Termination of Publicly Listed Companies Suffering Losses (the "Measures") were recently implemented. Somewhat similar to NASDAQ de-listing parameters, the Measures establish trigger mechanisms for the conditions of and procedures for suspension, reinstatement and/or termination of a company's listing in the securities market.
According to the Measures, Stock Exchanges shall have the right to determine whether the listing of those companies suffering losses for three successive years should be suspended. If the Exchange makes such a determination, those companies whose listings are suspended may apply for a grace period. Those who fail to apply for a grace period, or whose applications are not approved, shall be terminated by the Securities Committee. If a company whose listing has been suspended turns profitable within the first accounting year of the grace period, they may apply for reinstatement of their listing. Those who fail to turn a profit or whose reinstatement application is not approved shall be terminated.
Although the guidelines for de-listing and reinstatement of a company's listing are different than those in the U.S., the underlying principle is the same - the securities markets wish to develop quality companies to be traded on their exchanges. Steps such as the implementation of these Measures help prepare the PRC markets as China moves closer to the world stage.