IPOs to resume after a yearlong freeze(2)

The reform plan also states the principal underwriter can decide the new share placement. At least 40 percent of shares placed offline should first ask for public offering funds and social security funds.

A callback mechanism between online and offline placements has been created to respect small and medium-sized investors' willingness. If the online purchase is positive, the proportion of the online purchase amount can at most be 80 percent of the total amount.

"The reform is good for investors because it is more market-oriented, and more private capital can participate in the stock market," said Bao Fan, founder and CEO of China Renaissance Partners, a premier merchant bank in China.

Bao said the reform is in accord with international practice and is good for protecting the interests of investors, especially small and medium-sized investors.

The first batch of companies will likely be popular among investors, not only because they have experienced a round of strict financial verifications led by the CSRC but also because the market has long awaited new shares, Bao said.

Bao added that the reform will accelerate IPO processing and companies in line for approval can expect faster listings.

"The reform plan and resumption of IPOs is significant for China's stock market in the long run, although the short-term effect might not be positive," said Hong Hao, managing director and chief strategist at BOCOM International Holdings Co Ltd.

Hong said China faces a funding shortage and Chinese companies face high financing costs, so companies' issuing prices can be low.

Also, the resumption of IPOs will divert capital from the secondary market. The ChiNext market will be the first to be influenced. The negative effect will spread to the small and medium-sized enterprises' board and main boards, which will put the country's stock market in the negative in the short term.

Hong added that the time between when companies are approved and go public may enable the secondary market to offset some negative consequences.

He said listed companies' designated placements, property investments and financial products can attract much funding, which is beneficial, since funding is currently inadequate in China.

The country's benchmark Shanghai Composite Index has dropped 2.1 percent this year, and the CSI300 Index has fallen 3.3 percent. They have been the worst performers among 20 primary equity indexes in the Asia-Pacific region tracked by Bloomberg.

The CSRC is also promoting preferred shares. Not only Chinese companies can apply to issue preferred shares but also unlisted Chinese companies and listed overseas enterprises that have registered domestically can apply, the commission said on Saturday.