"The new guidelines and the reopening will be good news for foreign investors who want to cash out of Chinese companies, Lin says.  DCM, a Silicon Valley venture capital firm with $2 billion under management has invested in 30 Chinese companies, making the firm a "moderate" investor in China, according to Lin. "We have institutional investors who want to get their money out. It provides exits for investors."  Some observers say that regulators were prodded to issue the new guidelines by Alibaba's decision to forgo a Chinese exchange for an IPO in the U.S. that could raise as much as $100 billion. But foreign investors say not all IPOs are suited to the Chinese domestic market.  Lin says Chinese Internet companies want go offshore because better analyst coverage and more companies to compare to deliver better valuations. Listing on a foreign stock exchange is also an ideal for many Chinese CEOs, says Edith Yeung, head of marketing for Dolphin Browser, a mobile browser, and an angel investor.  Yeung says many Chinese entrepreneurs view Yahoo co-founder Jerry Yang as a role model. "An American listing not only stands for freedom, it is the dream come true," Yeung says. Another problem for foreign investors that list in China is that shares are enumerated in Chinese currency. "You cannot (easily) change yuan to dollars," Lin says.  Lin says DCM's strategy is to list in China conventional manufacturers or makers of plastic products that have strong domestic markets. In March 2011, the firm took Shanghai Luxin Evotech, a maker of specialty wrapping paper, to the Shenzhen exchange (SZSE:002565). By contrast, DCM listed Vipshop, an online retailer of discounted brand-name products, on the New York Stock Exchange.  Gillis believes the attraction of listing in the domestic market will increase as Chinese capital markets mature. "I think the mainland market is the natural place for Chinese companies to list," Gillis says. "The only limitation has been the capacity of the Chinese market to absorb the number of companies that need to list."  (Read more: Year winds down, HK IPOs just ramping up)  But with the world's second-largest economy growing at a 7 percent annual rate and more than 700 million Internet users, the amount of money available to start-ups can only increase.  —By Joel Dreyfuss, Special to CNBC.com.
The window is set to open again on Greater China, the world's largest IPO market. Market reforms have some 760 companies lined up to go public next month.