China to launch trading board for start-ups in Shanghai

Xi also announced a pilot program through which companies seeking to list on the new board need only register, rather than enter the often time-consuming approvals process stipulated by domestic regulators.

The move comes as China looks for ways to revive poorly performing stock markets and spur investor confidence. A combination of reduced liquidity, slowing economic growth and trade tensions with the US has seen the Shanghai Composite Index fall 20% since the start of the year. It is the second-worst performer out of 94 primary market indexes globally.

Last month, the Chinese Securities Regulatory Commission (CSRC) announced measures intended to facilitate private equity investment in listed companies – as well as promising to speed up merger approvals and support bond issuance.

The new board will be known as Ke Chuang Ban, which translates as innovation and technology board. The hope is that it can provide smoother exits for investors, including PE firms,  routes to investors including China’s private equity firms, said a spokesperson for SSE. An implementation timetable has not yet been put in place.

China has considered various ways in which it can encourage more technology start-ups to list domestically, following a string of successful listings in the US and Hong Kong.

Earlier this year, guidelines were issued for Chinese Depository Receipts (CDRs) – a means through which companies that are either listed overseas or structured offshore can sell shares in the domestic market. Smart phone maker Xiaomi won approval to offer CDRs in June, but the plan was shelved due to a failure to agree terms with local regulators.

Market watchers suggest that Ke Chuang Ban could pose a potential threat to ChiNext, which was set up in 2009 on the Shenzhen Stock Exchange as a destination for start-ups and other innovative companies. There are presently 700 companies listed on ChiNext but the board only accounts for around 7% of the whole Shenzhen bourse.

“The questions is what kind of start-ups would be attracted by the new board? If it is aimed at luring ordinary technology start-ups, then these kinds of firms are already listed on ChiNext. If it’s aimed at drawing technology unicorns, the recent poor performance of some unicorns in Hong Kong and the US doesn't bode well for domestic investors,” said Meng Shen, an executive director with investment bank Chanson & Co.

 

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• Topics
• Greater China
• Technology
• IPO
• Regulation
• China
• regulation
• CSRC