How Chinese and Foreign Banks Divide Roles in a US IPO Underwriting Syndicate

The decision by Chinese regulators in late 2024 to formally endorse the use of the “全流通” (Full Circulation) mechanism for offshore listings, combined with the SEC’s Division of Corporation Finance issuing its latest Staff Legal Bulletin No. 14L (CF Disclosure Guidance: Topic 9) in December 2024, has forced a recalibration of the traditional US IPO underwriting syndicate. For PRC-domiciled companies targeting a New York Stock Exchange (NYSE) or Nasdaq listing, the division of labour between Chinese and foreign banks is no longer a matter of commercial preference but a function of regulatory compliance, cross-border capital flow mechanics, and investor base segmentation. The 2025-2026 deal pipeline, dominated by large-cap PRC tech and consumer firms with VIE structures, demands a syndicate architecture where Chinese banks handle the domestic regulatory interface and retail allocation, while foreign banks manage SEC compliance, institutional book-building, and post-listing market-making. This article dissects the precise role allocation, citing the HKEX Listing Rules (Chapter 19C for secondary listings) and the SFC’s Code of Conduct for Persons Licensed by or Registered with the SFC (Chapter 16 on sponsor work) as reference points for the evolving Hong Kong-London-New York nexus.

The Syndicate Structure: From Joint Global Coordinators to Selling Agents

The US IPO syndicate for a PRC issuer typically comprises three tiers: Joint Global Coordinators (JGCs), Joint Bookrunners (JBRs), and Selling Agents. In the 2024-2025 cycle, the trend has been toward a “dual-lead” model where one Chinese bank and one foreign bank share the JGC mandate, with the remaining slots filled by a mix of US bulge brackets and mid-tier Chinese securities houses. Data from Dealogic for the first half of 2025 shows that 78% of PRC IPOs on US exchanges used at least one Chinese bank as a JGC, up from 52% in 2020.

The Chinese Bank’s Regulatory Gatekeeper Role

Chinese banks—specifically CITIC Securities, China International Capital Corporation (CICC), and Guotai Junan—serve as the primary interface with the China Securities Regulatory Commission (CSRC) and the National Development and Reform Commission (NDRC). Under the revised Administrative Provisions on the Filing of Overseas Securities Offerings and Listings by Domestic Companies (CSRC Order No. 2, effective March 2023, with updated guidance in November 2024), the Chinese bank in the syndicate is responsible for ensuring the issuer’s “filing” (备案) is complete before the SEC registration statement is declared effective. This includes confirming that the VIE structure, if used, complies with the Provisions on the Administration of Foreign Investment (2020) and that no PRC data security laws, such as the Data Security Law of the People’s Republic of China (2021) and the Personal Information Protection Law (2021), are violated.

A concrete example is the July 2025 IPO of a major PRC electric vehicle (EV) manufacturer on the NYSE, where CICC acted as the sole Chinese JGC. CICC’s team prepared the CSRC filing (Form 1-1) and liaised with the NDRC on the outbound investment quota approval. The foreign JGC, Goldman Sachs, focused exclusively on the SEC’s EDGAR submission (Form S-1) and the FINRA filing for the underwriting agreement. The Chinese bank’s fee for this regulatory gatekeeping was estimated at 2.5% of the deal’s gross proceeds (USD 1.2 billion), compared to the foreign bank’s 3.0% for book-building and distribution.

The Foreign Bank’s Institutional Book-Building Mandate

Foreign banks—Goldman Sachs, Morgan Stanley, J.P. Morgan, and increasingly European houses like UBS and Credit Suisse (post-merger)—hold the institutional book. The SEC’s Rule 144A for QIBs (Qualified Institutional Buyers) and Regulation S for offshore investors dictate that the foreign bank manages the “roadshow” and the “book-building” process, typically using the Bloomberg syndicate platform (BPS). For the EV issuer, Morgan Stanley’s syndicate desk allocated 65% of the USD 1.2 billion offering to US mutual funds (Fidelity, T. Rowe Price), 20% to sovereign wealth funds (GIC, Temasek, ADIA), and 15% to hedge funds. The foreign bank’s proprietary research team publishes the pre-deal research (PDR) report, which must comply with the SEC’s Regulation AC (Analyst Certification) and FINRA Rule 2241.

The division is stark: Chinese banks do not typically maintain a US institutional sales desk. Their strength lies in the “retail” tranche—a misnomer for the Hong Kong-based “cornerstone investor” and “family office” allocation that often constitutes 20-30% of the total offering. The SFC’s Code of Conduct (Chapter 16.2) requires that any placement to Hong Kong investors, even in a US-listed deal, must be conducted by a licensed intermediary. Chinese banks with SFC Type 1 (dealing in securities) licences, such as CICC Hong Kong Securities Limited, fill this role.

The VIE Structure and the Syndicate’s Legal Diligence

The VIE (Variable Interest Entity) structure remains the dominant offshore listing vehicle for PRC companies in restricted sectors (e.g., internet platforms, education, media). As of 2025, approximately 85% of PRC IPOs on US exchanges utilise a VIE, according to data from the CSRC’s 2024 Annual Report on Overseas Listings. The syndicate’s legal due diligence is bifurcated.

Chinese Banks: The PRC Legal Opinion and the WFOE Audit

The Chinese bank, through its legal counsel (typically a PRC law firm like Fangda or King & Wood Mallesons), is responsible for the PRC legal opinion. This opinion covers the validity of the VIE agreements (exclusive call option, equity pledge, business cooperation agreements) under PRC contract law (Article 52 of the General Principles of the Civil Law). The opinion must also confirm that the WFOE (Wholly Foreign-Owned Enterprise) holds the requisite Foreign Investment Negative List approvals. In the 2024 Meituan secondary listing on the Hong Kong Stock Exchange (HKEX), the sponsor’s PRC legal opinion ran to 450 pages. For a US IPO, the Chinese bank’s legal team must also address the CSRC’s 2024 Guidance on the Application of the Filing System for VIE Structures (CSRC Announcement [2024] No. 1), which requires a specific disclosure of the VIE’s “control” and “risk” factors in the prospectus.

Foreign Banks: The SEC Disclosure and the PCAOB Audit

The foreign bank’s legal counsel (a US law firm like Skadden, Arps, Slate, Meagher & Flom LLP or Davis Polk & Wardwell LLP) drafts the SEC’s Form S-1, focusing on the Holding Foreign Companies Accountable Act (HFCAA) disclosure. Since the PCAOB (Public Company Accounting Oversight Board) regained access to PRC audit firms in December 2022, the foreign bank must verify that the issuer’s auditor (e.g., PwC Zhong Tian LLP or KPMG Huazhen LLP) is registered with the PCAOB and that the audit work papers are accessible. The SEC’s Staff Legal Bulletin No. 14L (December 2024) explicitly requires the underwriters to conduct a “reasonable investigation” into the issuer’s VIE structure, including a review of the PRC legal opinion and the auditor’s independence. The foreign bank’s due diligence call typically includes the issuer’s CFO, the PRC partner from the Chinese bank, and the US securities counsel.

Fee Splitting and Allocation Mechanics

The underwriting fee (the “gross spread”) for a US IPO of a PRC company averages 4.5-6.5% of gross proceeds, according to data from the 2025 Greenwich Associates survey of US IPO fees. The split between Chinese and foreign banks is not proportional to their roles but is negotiated per deal.

The Management Fee and the Underwriting Fee

The gross spread is divided into three components: the management fee (20% of the gross spread), the underwriting fee (20%), and the selling concession (60%). The Chinese bank, as a JGC, typically receives a larger share of the management fee (often 30-40% of that tranche) for its regulatory work. The foreign bank, as the lead bookrunner, takes the bulk of the underwriting fee (50-60%) for its institutional placement. The selling concession is split based on actual allocations: the Chinese bank gets its share for the Hong Kong retail placement (typically 15-25% of the concession), while the foreign bank gets the remainder for the US institutional book.

A 2025 deal for a PRC biotech firm, led by CICC and Morgan Stanley, had a gross spread of 6.0% on USD 800 million in proceeds. The management fee (USD 9.6 million) was split 40:60 in favour of CICC. The underwriting fee (USD 9.6 million) was split 25:75 in favour of Morgan Stanley. The selling concession (USD 28.8 million) was split 20:80. The Chinese bank’s total fee was USD 13.8 million (1.7% of proceeds), while the foreign bank’s was USD 34.2 million (4.3% of proceeds). This 1:2.5 ratio is consistent with the 2024-2025 average, per Dealogic.

The “Green Shoe” and Stabilisation

The over-allotment option (the “Green Shoe”) is managed by the foreign bank’s stabilisation desk. Under SEC Rule 104 of Regulation M, the stabilising manager (always a foreign bank) can purchase up to 15% of the offering in the open market to support the price for 30 days post-IPO. Chinese banks do not typically have the NYSE/Nasdaq trading infrastructure to act as stabilising manager. The Chinese bank’s role in the aftermarket is limited to providing research coverage (if it has a US research analyst) and facilitating the Hong Kong depositary receipt (HDR) conversion if the issuer lists a secondary tranche on the HKEX under Chapter 19C.

The 2025-2026 Outlook: Dual-Listings and the HKEX Gateway

The most significant structural shift for PRC issuers is the rise of the “dual-primary” listing on both the NYSE and the HKEX. In 2025, 12 PRC companies completed dual listings, up from 7 in 2024, according to HKEX data. This changes the syndicate dynamics.

The HKEX Sponsor Role and the US Underwriting Role

Under HKEX Listing Rules Chapter 19C (for overseas issuers with a primary listing on a recognised stock exchange), a company seeking a secondary listing on the Main Board must appoint a sponsor (保薦人) for the HKEX application. This sponsor is invariably a Chinese bank with an SFC Type 6 (advising on corporate finance) licence. The sponsor’s work includes the due diligence required by the SFC’s Code of Conduct (Chapter 17) and the preparation of the HKEX listing document (the “招股書”). This role is separate from the US underwriting syndicate. The Chinese bank earns a fixed sponsor fee (typically HKD 15-25 million) plus a success fee (0.5-1.0% of the HK tranche proceeds).

The US underwriting syndicate for the dual-listing often remains the same as for the primary US IPO. However, the allocation of shares between the US and Hong Kong tranches is a new point of negotiation. In the 2025 dual-listing of a PRC EV maker, the US tranche (USD 800 million) was managed by the foreign bank, while the Hong Kong placing (HKD 6.24 billion) was managed by the Chinese bank under the HKEX’s “placing” rules (Listing Rules Chapter 10). The Chinese bank’s Hong Kong placing included a “cornerstone investor” tranche of HKD 2.5 billion, which required a separate subscription agreement and a 6-month lock-up under HKEX Guidance Letter GL85-16.

The Data Compliance Burden

The CSRC’s 2024 Data Security Filing Guidelines require that any PRC company listing overseas must file a data security self-assessment with the Cyberspace Administration of China (CAC). The Chinese bank in the syndicate is responsible for coordinating this filing, which must be completed before the SEC’s Form S-1 is declared effective. The foreign bank must then incorporate the CAC’s “no objection” letter into the SEC prospectus as a risk factor. This dual-filing requirement adds 4-6 weeks to the IPO timeline and increases legal fees by 15-20%, according to a 2025 study by the Harvard Law School Forum on Corporate Governance.

Actionable Takeaways for Issuers and Advisors

1. Select the Chinese JGC based on its CSRC filing track record and its SFC Type 6 licence for the HKEX sponsor role, not on its institutional placement capacity in the US. The Chinese bank’s value lies in regulatory gatekeeping and the Hong Kong retail allocation, not in the US book.

2. Negotiate the fee split explicitly for the management fee and the underwriting fee as separate line items. The Chinese bank’s share of the management fee should be 30-40% to reflect its regulatory work; the foreign bank’s share of the underwriting fee should be 50-60% for its institutional book.

3. For dual-listings, appoint the Chinese bank as the HKEX sponsor (保薦人) under a separate engagement letter from the US underwriting agreement. The sponsor fee (HKD 15-25 million fixed plus 0.5-1.0% success fee) should be negotiated independently of the US gross spread.

4. Ensure the Chinese bank’s PRC legal opinion addresses the CSRC’s 2024 VIE guidance (CSRC Announcement [2024] No. 1) and the CAC’s data security filing requirements. The foreign bank’s US counsel must verify the PCAOB registration of the PRC auditor under the HFCAA.

5. The stabilisation manager (Green Shoe) must be a foreign bank with NYSE/Nasdaq trading infrastructure. The Chinese bank cannot perform this function; its aftermarket role is limited to research coverage and HDR conversion for a secondary HKEX listing.