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By Xie Fang

In an effort to purge the A-share-listed companies with major law violations, China’s two stock exchanges, namely, the Shanghai Stock Exchange and the Shenzhen Stock Exchange, issued their new heavy-handed delisting rules last Friday, The Paper reported.

The new rules specify the situations under which an A-share-listed company will be delisted from the stock market by the two stock exchanges, including having fraudulent behaviors in the process of its initial public offering (IPO) or restructuring for the listing, having false statements in its financial reports, and seriously harming national security or public safety.

Under the new rules, companies which are delisted due to their dishonesty during the listing process will have no chance to be listed again in the A-share market, while those delisted under the two other situations will not be allowed to apply for a new listing until five years from their delisting.

The new rules shorten the length of the period during which the trading of the stocks of the companies with the said law violations are suspended from the previous 12 months to only 6 months, after which the companies will be automatically delisted no matter whether or not they take any remedial measures during the period.

Compared with the previous delisting rules, seriously harming national security or public safety is a newly-added situation under which a company should be delisted.

The addition can be seen as a government response to a high-profile case this July in which an A-share-listed vaccine developer was reported to produce inferior vaccine products, raising public concerns about the safety of the country’s vaccine industry. The delisting process for the company has been triggered under the new rules.

The new rules came roughly four months after the China Securities Regulatory Commission (CSRC), the country’s top securities watchdog, issued a document demanding an improvement of the existing delisting rules.

Data from the Shenzhen Stock Exchange shows that there were over 30 A-share-listed companies being delisted under the previous delisting rules.