By staff reporter Song Yanhua

(Caijing.com.cn) The international board of China's A-share market is likely to feature separate regulation for red chips and "pure" overseas firms, a source close to the China Securities Regulatory Commission told Caijing.

The source added that the CSRC itself could decide on the rules governing red chips and overseas companies, rather than wait for new laws to be enacted.

The source said the departments of the CSRC likely to exercise supervision over the two categories of international board listings are the public offering supervision department for red chips and the international department for "pure" overseas firms.

Red chips refer to mainland-backed companies that are incorporated overseas and listed in Hong Kong, such as China Mobile (HKEX: 0941) and CNOOC (HKEX: 0883).

A declining Chinese stock market is likely to further delay the birth of the international board, the source said, adding that the authorities will still follow the plan to approve the listing of red-chips ahead of pure overseas companies.

China has been preparing for the debut of an international board to allow overseas companies to offer yuan-denominated shares on the A-share market.

The source close to CSRC said drafting the rules are a top priority in the regulator's preparations for the board.

China's Company Law and Securities Law do not bar overseas-incorporated companies from offering shares at mainland exchanges, but China lacks detailed rules governing such offers.

The source close to the CSRC said the commission does not intend to pursue revisions to Company Law and Securities Law.

Bao Fangzhou, a lawyer with the Allbright law firm, said a regulatory framework needs to be put in place before the international board can operate.

Rules that do not apply to overseas firms seeking A-share listings also need to be modified - including a provision that requires companies seeking initial public offerings to follow Chinese accounting standards.

"This is obviously not applicable to overseas companies," Bao said.

The requirements on governance and disclosure are also overly stringent for companies seeking a listing at the international board, the source close to the CSRC said, and may need to be loosened.

The source said regulators will treat red chips differently from other overseas firms because red-chip companies have the bulk of their assets in the mainland.

Although the New York Stock Exchange and HSBC have expressed their intention to be among the first companies to be listed on the international board, most foreign companies that have shown interest are waiting to evaluate the performance of the first batch of listings before making their own decision, said a senior executive at a domestic brokerage, who declined to be identified.

The executive also said that Chinese brokerages such as CICC and Citic Securities now see the international board as a key area for business growth as most major Chinese companies have listed on domestic or overseas markets.

1 yuan = 14 U.S. cents

Full article in Chinese: http://www.caijing.com.cn/2009-09-09/110244299.html