The Rise of Mainland-Incorporated Biotech Companies on the Hong Kong Stock Exchange

For years, the default path for Chinese biotech companies seeking a Hong Kong listing was the Cayman Islands-incorporated “red-chip” structure. The operating entity sat in mainland China, but the listed holding company was domiciled in an offshore jurisdiction — familiar to international investors and convenient for cross-border capital flows.

That default is shifting. In 2024 and 2025, 14 out of 20 biotech companies that listed on HKEX under Chapter 18A were incorporated directly in mainland China — the so-called “H-share” structure. Only 6 were incorporated in the Cayman Islands. Today, mainland China-incorporated companies now account for more than one-third of all HKEX-listed biotech companies.

This is not a one-year anomaly. It is a structural realignment driven by regulatory changes, market forces, and shifting preferences among founders and investors. For overseas law firms, consultancies, and investors, this trend has profound implications for due diligence, legal compliance, and information access.

1. The Numbers: A Clear Tipping Point

The data from the Skadden 2026 Biotech Report tells a stark story. Among the 20 biotech companies that completed their Hong Kong IPOs in 2024–2025:

This represents a dramatic reversal from earlier years. In the early cohorts of 18A listings (2018–2021), the vast majority of companies were incorporated in the Cayman Islands. The red-chip structure was the de facto standard, driven by the convenience of offshore incorporation for USD fundraising, the familiarity of international investors with Cayman-incorporated entities, and the relative uncertainty around the H-share regime.

But 2025 appears to have been a tipping point. As one industry observer noted, “2025年港股上市的119家公司中，H股模式已反超红筹” — H-share listings overtook red-chip listings among the 119 companies that went public in Hong Kong in 2025[reference:0]. The rise of H-share structures in biotech is part of a broader market-wide shift.

2. Why the Shift? Three Driving Forces

The move toward mainland China incorporation is not accidental. It reflects three converging forces: regulatory clarity, efficiency gains, and changing perceptions of risk.

2.1 Regulatory Clarity: The CSRC Filing Regime

The most important driver has been the centralisation of overseas listing oversight under the China Securities Regulatory Commission (CSRC). Since the implementation of the Administrative Measures for the Overseas Listing and Offering of Securities by Domestic Enterprises, all mainland China-based companies seeking overseas listings — whether via H-share or red-chip structures — must complete a CSRC filing process.

This has leveled the playing field between H-share and red-chip routes. Previously, red-chip structures could bypass certain domestic regulatory approvals, giving them a speed advantage. Today, both routes require CSRC clearance — but the H-share path is often faster and more predictable[reference:1]. H-share “full circulation” (全流通) filings typically take around 12 days on average, significantly faster than the red-chip alternative[reference:2].

Moreover, CSRC scrutiny of red-chip structures has intensified. Regulators are increasingly questioning the “necessity” and “rationality” of offshore structures, particularly in sectors without foreign ownership restrictions[reference:3]. Companies that cannot justify their red-chip structure may face delays or even requirements to dismantle the structure before listing[reference:4]. For biotech companies, where time-to-market is critical, the H-share route offers greater certainty.

2.2 Efficiency Gains: Faster Fundraising and Lower Costs

Red-chip structures involve multiple layers of SPVs (special purpose vehicles) in offshore jurisdictions, complex cross-border tax arrangements, and ongoing compliance obligations[reference:5]. These structures were historically justified by the need to accommodate USD investors and facilitate overseas exits.

But the H-share route offers simpler, more transparent structures. Founders can establish a foreign-invested enterprise (FIE) directly in mainland China, which can accommodate both RMB and USD investors without the need for ODI (overseas direct investment) approvals[reference:6]. This reduces fundraising friction and allows companies to move faster — a critical advantage in the fast-paced biotech sector.

For employees, the H-share structure also aligns with domestic regulatory preferences for employee shareholding platforms (rather than offshore option plans), which we discuss in more detail below.

2.3 Changing Perceptions of Risk

Perhaps the most subtle but important driver is a shift in risk perception. In the past, red-chip structures were seen as offering greater flexibility for overseas exits and M&A. Today, the pendulum has swung the other way. The regulatory uncertainty surrounding red-chip structures — particularly around data security, human genetic resources, and cross-border capital flows — has made them riskier in the eyes of many founders and investors[reference:7].

At the same time, the H-share “full circulation” mechanism has addressed historical liquidity concerns[reference:8]. Previously, H-share structures had a significant disadvantage: the inability of domestic shareholders to trade their shares freely. The full circulation reform has largely solved this, making H-share structures more attractive to founders and pre-IPO investors.

3. H-Share vs Red-Chip: What’s the Difference?

For overseas professionals conducting due diligence, the distinction between H-share and red-chip structures is not merely technical — it affects where and how you can access company information, what legal framework applies, and what risks you need to assess.

Feature	H-Share (Mainland Inc.)	Red-Chip (Cayman Inc.)
Listing entity	Mainland China-incorporated joint stock company	Cayman Islands-incorporated holding company
Governing law	PRC Company Law	Cayman Islands Companies Law
CSRC filing	Required (standard process)	Required (scrutiny may be higher)
Shareholder register	Maintained in China (CSDC)	Maintained in Cayman
Employee incentives	Typically employee shareholding platforms	Typically share option / RSU plans
Information access	PRC corporate registry (public)	Cayman registry (limited public info)
Due diligence	Direct access to PRC corporate records	Indirect; requires accessing PRC operating subs

Each structure has its merits. Red-chip structures still offer advantages for companies with global M&A exit strategies or those requiring US-style investor protections[reference:9]. But for companies whose primary goal is a Hong Kong listing with a clear, efficient path, the H-share route is increasingly the preferred choice.

4. Employee Incentives: A Telling Difference

One of the most practical consequences of the shift to H-share structures is the way companies structure employee incentives. This is not a minor detail — it affects talent retention, cash conservation, and alignment of interests between employees and shareholders.

In Cayman Islands-incorporated companies, the norm is to grant share options or restricted share units (RSUs) over the listed shares. These are familiar to international investors and operate under the company’s share plan rules.

In mainland China-incorporated companies, however, PRC laws and regulations impose restrictions on direct equity grants to employees. As a result, these companies have turned to employee shareholding platforms — special purpose vehicles established by the company or its founders to hold shares on behalf of employees. Employees do not receive options or awards over listed shares; instead, they hold interests in the platform entity.

Among the 2024–2025 listing cohort:

• Only 2 companies (both Cayman-incorporated) adopted post-IPO share plans (options and/or RSUs).
• 14 companies (all mainland China-incorporated) used employee shareholding platforms.

This structural difference has implications for due diligence. Employee shareholding platforms may provide less transparency than traditional share plans, and the economic interests of employees may be subject to different terms and conditions. Overseas investors need to understand these structures — and verify them through official corporate records.

5. What This Means for Due Diligence

For overseas law firms, consultancies, and investors, the rise of H-share structures presents both opportunities and challenges.

5.1 Information Access: Easier in Some Ways, Harder in Others

The good news: for H-share companies, corporate registration information is publicly available through the PRC’s National Enterprise Credit Information Publicity System. This system provides access to:

• Basic registration and incorporation details
• Shareholder and director information
• Annual reports and financial filings
• Administrative penalties and legal risks
• Historical changes and social security contributions

For red-chip companies, by contrast, the listed entity is incorporated in the Cayman Islands, where public corporate records are limited. To verify the underlying operating business, you must go through the PRC operating subsidiary — which may not have the same level of public disclosure.

The challenge: language and jurisdictional barriers. PRC corporate records are maintained in Chinese, and accessing them requires navigating PRC administrative procedures. Many overseas professionals lack the local knowledge, language skills, and relationships to obtain these records efficiently.

5.2 What to Verify

Whether you are dealing with an H-share or red-chip company, effective due diligence requires verifying several key areas:

• Legal status and good standing: Is the company properly incorporated and in good standing with PRC authorities?
• Shareholder and ownership structure: Who are the ultimate beneficial owners? Are there any undisclosed related-party relationships?
• Director and officer information: Who is running the company? What is their track record?
• Financial health: What do the annual reports and financial statements reveal about the company’s performance and sustainability?
• Legal and regulatory risks: Are there any outstanding administrative penalties, lawsuits, or regulatory investigations?
• IP ownership: Does the company properly own or have rights to its core intellectual property?

For H-share companies, much of this information is available through official PRC channels — but accessing it requires local knowledge. This is where specialised services come in.

6. Bridging the Information Gap

The structural shift toward mainland China-incorporated biotech companies means that overseas investors and professionals need reliable, efficient access to PRC corporate information now more than ever. The information is out there — but it is often locked behind language barriers, administrative procedures, and unfamiliar regulatory frameworks.

This is precisely the gap that specialised China company information services are designed to fill. Whether you need to:

• Verify the legal registration and good standing of a mainland China-incorporated biotech company
• Obtain official credit reports and financial filings from PRC authorities
• Conduct director and shareholder background checks
• Assess legal and regulatory risks through official records
• Secure notarisation, legalisation, or apostille for PRC corporate documents

Services that provide official enterprise credit reports, professional due diligence reports, and Hong Kong company information can help bridge the information gap, enabling more confident, better-informed commercial decisions.

7. Conclusion

The shift from Cayman Islands to mainland China incorporation is one of the most significant structural changes in the HKEX biotech ecosystem since the introduction of Chapter 18A. It reflects a new regulatory reality — one in which the CSRC filing regime, H-share full circulation, and changing risk perceptions have made the H-share route faster, more predictable, and increasingly attractive.

For overseas investors, law firms, and consultancies, this shift has practical consequences. Due diligence for H-share companies requires direct access to PRC corporate records — which, while publicly available, often require local expertise, language skills, and knowledge of PRC administrative processes to obtain efficiently and reliably.

As the trend toward mainland China incorporation continues, the ability to access, verify, and interpret PRC corporate information will become an increasingly important capability for anyone doing business with — or investing in — China’s dynamic biotech sector.