Recently, a set of data has been circulating in business circles: In a certain quarter, nearly 20 Chinese-backed enterprises publicly filed applications for initial public offerings (IPOs) on US exchanges, but none of these enterprises are mainland-incorporated entities, and all are Hong Kong companies. This is not a coincidence, nor is it something new — rather, it is a legally compliant listing pathway that Chinese enterprises have collectively explored under the current registration-based listing regime. The entry barriers for China’s A-share market have been rising steadily. The Beijing Stock Exchange, the STAR Market and ChiNext Board are no longer a playground for small and medium-sized enterprises (SMEs). Without hard-core technological strengths, continuous profitability or a considerable valuation, such enterprises are not even qualified to join the listing queue. The liquidity issue in the Hong Kong stock market is a well-documented and long-standing problem: Among companies with a market capitalization below 10 billion yuan, it is common to see those with an average daily turnover of less than 10 million yuan. They cannot raise funds through listing, and even have to bear additional operating costs out of their own pockets every year. The NASDAQ offers unique appeal: As long as the business model is viable and the growth logic is clear, enterprises can gain capital recognition, and subsequently conduct continuous financing through private placement, convertible bonds and other means. This kind of flexibility is something that the A-share and Hong Kong stock markets cannot provide. To put it straightforwardly, this is not "capital smuggling", but corporate structure design. The core logic is to move the actual core of business operations to Hong Kong, so that the Hong Kong company serves as the listing entity, rather than a paper shell. In this way, the listing entity is not a mainland enterprise, so the registration requirements naturally do not apply. Based on practical experience, the following types of enterprises are most suitable for this pathway: Traditional foreign trade enterprises (transfer order settlement to Hong Kong, retain production and R&D operations in the mainland) Cross-border e-commerce enterprises (place platform operations and brand ownership overseas) Export processing enterprises (set the group headquarters and sales center in Hong Kong or Singapore) Enterprises that already have international layout needs The common characteristics of these enterprises are: their businesses are naturally cross-border, and moving the operating center overseas has a solid business logic, rather than a forced "relocation". Companies registered in the Cayman Islands and British Virgin Islands (BVI) can only serve as shells and cannot undertake substantial business operations. Singapore is an option, but its connection with the mainland is not as close as that of Hong Kong. The advantages of Hong Kong are: its common law system is highly compatible with the US capital market, personnel exchanges between Hong Kong and the mainland are extremely convenient, its financial supporting system is the most complete, and it is fully legally and compliantly compliant at the policy level. The difficulty of this pathway is not "whether it can be done", but "whether you have the ability to do it" — corporate structure design, business restructuring and compliant operation, every link requires professional teams to provide guidance and support. If you find the right professional team, this pathway is not complicated; if you find the wrong one, every step will be a pitfall. This is not a secret of "capital smuggling", but the optimal choice conducive to enterprise development within the space allowed by the rules. Truly professional listing planning never relies on gray-area operations, but relies on in-depth understanding of the rules and precise execution. © 2021 Meishun (Hong Kong) Management Consulting Co., Ltd. and Meishun (Hangzhou) Management Consulting Co., Ltd. All rights reserved. Meishun Meiyin (Hangzhou) Consulting Management Co., Ltd. is a domestic subsidiary of Hong Kong Meishun Management Consulting Co., Ltd. under the same ultimate controlling party. Both companies are under the same ultimate controlling party, operate under the One China framework, and abide by the laws of Hong Kong and mainland China.