China expected to expand OTC equity market

China will expand its "new third board," or a new over-the-counter (OTC) equity market, in the second half of 2012, dealers said.

A full-fledged and expanded over-the-counter stock market for high-tech and growth enterprises will open to help integrate transactions on national OTC markets, according to a marketing manager at a leading securities firm who requested anonymity.

"Judging from comments by high-ranking officials, there is no doubt that regulators will expand the board in the second half of this year," the manager said.

A trial version of the OTC market, based in Beijing's Zhongguancun tech district and launched in 2006, gained new momentum after an inspection tour by more than 20 senior officials led by Vice Premier Wang Qishan in March.

Other officials accompanying Wang included Beijing mayor Guo Jinlong and Guo Shuqing, chairman of the China Securities Regulatory Commission (CSRC). Wang gave the instruction to speed up OTC market development through reform and innovation.

Last month, vice chairman of the CSRC Yao Gang said the "new third board" will establish a market maker system and be open to individual investors.

The moves will increase transparency and liquidity on the new market, according to a Thursday report by the China Securities Journal.

The OTC board is one of a series of recent measures by Chinese policymakers to expand access to credit for small, privately-owned firms that have largely been shut out of China's financial system, which is dominated by state-owned banks lending to state-owned companies.

The Zhonguancun-based OTC market is similar to the Over-the-Counter Bulletin Board in the U.S. and provides an electronic platform for non-listed companies to raise funds. It is the third of its kind in China following regional OTC stock markets in Shenzhen and Shanghai.