Chinese securities regulators launched on Thursday a NASDAQ-style sci-tech innovation board, a breakthrough that experts said is aimed at promoting the country's technological power and supporting efforts by domestic companies in research and innovation amid the U.S. suppression of China's technological development.
The timely launch also highlights China's resolve to further develop and invest in core technologies - a sign that its technological strength will not be shaken by the ongoing U.S.-China trade war, expert noted.
The new board is known by its English name - STAR Market - in the hope that it will become a rising star in the country's financial markets. The STAR Market will try a registration-based IPO system and will allow companies that have yet to make a profit to get listed, as in the case of NASDAQ.
To show the importance the central government attaches to the new tech board, Vice Premier Liu He attended the launch on Thursday morning at the Lujiazui Forum in Shanghai, with Yi Huiman, chairman of the China Securities Regulatory Commission (CSRC), Secretary of the Shanghai Municipal Committee of the Communist Party of China Li Qiang and Shanghai Mayor Ying Yong.
In his keynote speech, Liu stressed that the two priorities for the new board are registration-based IPO reform, with information disclosure at its center, and enhancing the rule of law by raising penalties for violations and strengthening supervision and law enforcement.
Yi cited two reasons for the launch of the STAR Market and the piloted registration-based listing system.
The first is to support the development and growth of science and technology companies with development potential and high market acceptance. The second is to use the board as a test for reforms. The securities regulator will implement pilot reforms in issuance and listing, sponsorship underwriting, market-based pricing, trading and delisting, and will pass on the experience to other boards.
So far, 122 companies have applied for listing on the board, which is expected to see the first batch of companies in the next two months, Huang Hongyuan, chairman of the Shanghai Stock Exchange, told the forum on Thursday.
Huang Hongyuan, chairman of the Shanghai Stock Exchange, told the forum on Thursday that so far, 122 companies have applied for listing on the board, which is expected to see the first batch of companies in the next two months.
Nevertheless, Yi cautioned about the possibility of market risks.
Yi also announced plans for a series of reforms, including revisions to Qualified Foreign Institutional Investors (QFII) and Renminbi Qualified Foreign Institutional Investors (RQFII) rules, opening-up of the futures market, opening-up of the exchange bond market, and the issuance of yuan-denominated bonds, namely "panda bonds" by overseas institutions.
Observers have stressed many times that China will not slow down on development and opening-up amid the trade war.
"It's time to further open China's capital market, and the opening-up will be made notwithstanding a trade war with the U.S.," said Dong Dengxin, director of the Finance and Securities Institute at Wuhan University of Science and Technology.
Speakers at the forum also offered suggestions on the new tech board. Chu Xiaoming, chairman of Shenwan Hongyuan Securities, proposed that there should be room for flexibility on the STAR Market in the Securities Law, since revising a law is not easy.
Meanwhile, amendments should also be made to the Criminal Law to crack down on violations. From the perspective of protecting small- and medium-sized investors, authorities need to study the U.S. litigation system as soon as possible.
"The new board also marks an important move for the country's capital market, as the establishment of some rules such as IPO standards and reviews are based on the NASDAQ," Dong said.
Because the new board was established to rival the NASDAQ, once the domestic firms' listing requirements are fulfilled, it will also welcome more foreign participation in the future, which is in line with the country's financial opening-up efforts, Dong said.
