China's top securities regulator is encouraging candidates for initial public offerings to shift to the over-the-counter market to avoid a prolonged wait.

In a news briefing in Beijing on Wednesday, the China Securities Regulatory Commission also said for the first time that it will allow candidates to choose freely between Shanghai and Shenzhen stock exchanges, a policy relaxation that is in line with its reform toward a registration-based system that prevails in developed markets.

As of March 20, a total of 685 candidates were waiting to issue shares, with 170 scheduled for a Shanghai listing and the remaining 515 standing in line in Shenzhen. Analysts forecast it will take the commission one to two years to finish reviewing them all. The candidate list ballooned during an IPO suspension from November 2013 to January 2014, when the commission prepared for reform that strengthened information disclosure and oversight of investment banks.