China doesn't do failure. If reforms underwhelm, blame the timeline, or the data sample. So it is with the revamp of rules on initial public offerings, billed as an attempt to impose a more market-oriented pricing regime.
Well, sort of. The China Securities Regulatory Commission certainly seems to have taken a step back. In the past, big companies were authorised to start trading at about 20 times forward earnings and smaller ones at 30, regardless of what investors actually wanted to pay. Now China State Construction, the nation's biggest housing contractor, and at $6.2bn likely to be the world's biggest IPO this year, is limbering up to debut at about 50 times trailing earnings, in line with the industrials sector, at 58.
But the new outcome – for the time being, at least – is indistinguishable from the old one. The trio of smaller companies let loose on Shenzhen within the past fortnight had an average first-day spike of exactly 100 per cent – in the same league as debutants' average 152 per cent rise last year. Over-subscription seems endemic: Sichuan Expressway just locked up $100bn of investor orders to raise $263m. Single accounts can now take no more than 0.1 per cent of any deal, reducing the incentive to throw out ever-higher bids. But there is still no way of telling whether institutional money, be that from local governments, the army, or the police, is masquerading as retail investors, skewing the allocation process.