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On May 14, 2026, the U.S. Securities and Exchange Commission (SEC) officially approved the proposed rule change SR-NASDAQ-2025-069 (as modified by Amendment No. 3), introducing additional initial listing standards for companies primarily operating in China (including the Hong Kong and Macau Special Administrative Regions). The rules will take effect 30 days after approval.
This move is not merely elevating standards but represents Nasdaq’s positive signal in balancing investor protection and market vitality. For high-quality Chinese companies with strong fundamentals and compliance awareness, the new rules provide a clearer pathway to stand out in the global capital markets, attract premium investors, and achieve long-term value enhancement.
The New Listing Standards
In recent years, Chinese companies have shown strong enthusiasm for U.S. listings, reaching new highs in 2024 and 2025. China holds significant weight in emerging market indices and is a key allocation for global investors. However, some smaller or less liquid listings have raised regulatory concerns, including but not limited to potential manipulation risks, audit transparency, and cross-border enforcement challenges.
Nasdaq’s new rules focus on “China-based Issuers” and use quantitative standards to improve listing quality, aiming to ensure sufficient liquidity, investor base, and fair and orderly trading, while addressing concerns from Congress, state financial officers, SEC and the market.
Minimum Offering Size for an IPO
When conducting an IPO, China-based issuers must use a Firm Commitment Offering to issue securities to public holders in the United States, with gross proceeds to the company of no less than US$25 million. This is higher than the minimum Market Value of Unrestricted Publicly Held Shares (MVUPHS) of US$15 million required for Nasdaq Capital Market.
Minimum Market Value of Publicly Held Shares for a Business Combinations (e.g., Special Purpose Acquisition Companies (SPAC) Mergers)
To prevent circumvention of IPO rules, China-based issuers listing via business combination must have a MVUPHS of no less than US$25 million. This requirement ensures that the post-merger entities possess a sufficient public float, thereby mitigating the risk of speculative trading.
Direct Listing Restrictions (as defined in Rule IM-5315-1)
China-based issuers may only apply for direct listing on the higher-liquidity Nasdaq Global Select Market (NGS) and are not permitted to list on the Nasdaq Global Market (NGM) or Nasdaq Capital Market (NCM) via direct listing. They must also satisfy stricter requirements (e.g., a minimum Market Value of Publicly Held Shares of US$250 million).
The above restrictions help ensure that a company has sufficient public float, investor base, and trading interest to generate the market depth and liquidity necessary to promote fair and orderly trading in the secondary market.
Transfer Listing Requirements
China-based issuers transferring from over-the-counter (OTC) market or other national exchanges must have traded for at least one year on the prior market and have a MVUPHS at no less than US$25 million. This requirement ensures that securities to be listed on Nasdaq have adequate liquidity, distribution, and U.S. investor interest.
Determination Criteria for “China-based Issuers”
Nasdaq will holistically assess the following factors to determine whether a company is a China-based issuer, including:
- its headquarters or place of incorporation
- the location of its books and records
- the location of its assets (with at least 50% of the company’s assets located in such jurisdiction)
- the source of its revenues (with at least 50% of the company’s revenues derived from such jurisdiction)
- the location and citizenship of its directors and officers (with at least 50% of the company’s directors/officers are citizens of, or reside in, such jurisdiction)
- the location of employees (with at least 50% of the company’s employees based in such jurisdiction)
- whether the company is controlled by, or under common control with, one or more Chinese entities.
Nasdaq makes determinations on a holistic basis and may request sufficient information to support the above assessment. If China-based issuers do not satisfy the additional requirements described above, Nasdaq may deny their applications. Appeals are available under Nasdaq Rule 5800 Series.
Deeper Regulatory Logic and Data Support
Nasdaq’s analysis shows that many Chinese IPOs below US$25 million from 2022-2025 faced higher rates of compliance issues, with nearly half cited for continued listing failures. In addition, referrals for suspected market manipulation involving Chinese emerging market companies were disproportionately high relative to the overall proportion of Chinese companies listed on Nasdaq.
The rules aimed at mitigating the illiquidity, high volatility, and potential manipulation risks often associated with small-scale listings. Additionally, the new rules emphasize the due diligence advantages of a Firm Commitment Offering, which helps enhance disclosure quality and bolster investor confidence.
How High-Quality Companies Should Respond
- Plan capital operations well in advance: target an offering size of over US$25 million and partner with highly experienced investment banks.
- Strengthen corporate governance and transparency: enhance disclosures regarding VIE structures, audit arrangements, and internal controls, while proactively aligning with Public Company Accounting Oversight Board (PCAOB) and SEC requirements.
- Focus on core competitiveness: demonstrate strong revenue growth, a clear business model, and a global vision, highlighting the company’s advantages over “small-scale and speculative” issuers.
- Secure professional team support: collaborate with lawyers, auditors, and advisors who are deeply familiar with both U.S. and Chinese regulatory frameworks to ensure the completeness of the application materials.
Conclusion: Strategic Opportunities Under the New Rules
Nasdaq’s rule changes mark a more mature and standardized phase in U.S.-China capital market interactions. They serve as a screening mechanism that weeds out low-quality and volatile cases while creating a healthier, more liquid environment for truly competitive companies.
For well-governed, high-growth Chinese enterprises, these rules provide a competitive advantage: higher standards attract more institutional investors, enhance international brand recognition, and fuel further development for continuous financing and development. In the context of global allocation to China stories, leading compliant companies will seize broader opportunities and maximize value.
Companies intending to list are advised to assess early, prepare proactively, and embrace this standardized opportunity to leverage this regulatory normalization as a strategic opportunity.
If you have any enquiries regarding Nasdaq listings, or wish to learn more, please contact our Partner Gordon Tsang, Senior Associate Gary Kwok, Associate Maggie Yim or Associate Sam Liu.
This article is provided for general informational purposes only. It does not constitute, and should not be construed as, legal advice or investment guidance, nor does it create a solicitor-client relationship. The information contained herein may be updated or amended from time to time, and the applicability of any content will depend on specific facts and relevant laws or regulations. The feasibility of any company’s listing should be assessed on a case-by-case basis in light of its particular circumstances and the applicable regulatory framework. To the fullest extent permitted by law, our firm and our lawyers accept no responsibility for any loss or damage (whether direct or indirect) arising from any decision, action, or inaction taken in reliance upon the content of this publication.