China’s New Nasdaq-Style exchange is almost ready to be officially launched. Beijing is aiming to boost funding for its hi-tech pupils
President Xi Jinping already announced the new Shanghai-based tech board in November last year. Now China’s new Nasdaq-style exchange is ready to compete with New York and Hong Kong.
According to officials, the new board is a key initiative by PRC to provide domestic funding support to Chinese hi-tech and innovative start-ups, allowing “New Made in China” products to compete on a global level in areas such as microchips, self driving cars and automation.
Top venture capitalists and bankers will have a key role in deciding Beijing’s new tech board IPOs, that also started a countdown for its trading debut in June. On March 1, China Securities Regulatory Commission (CSRC) already unveiled regulations for its Technology Innovation Board. Chinese authorities will allow a wide range of technology companies (operating in science, robotic, new materials and chip making fields) and unprofitable tech firms, to list on Nasdaq-style new exchange.
Plus, foreign-funded mainland companies using VIE (variable interest entities) structures will be also welcome through the issuance of Chinese depositary receipts (CDR), giving the Shanghai stock market ad edge in attracting promising companies looking to raise capital for future growth. Companies included in the new Shanghai-based IPO are big tech names such as Beiren Robot, HeJian Technology and Wuhan Keqian Biology, which market capitalization is estimated around 1.1 billion US$.
Actually, no e-commerce names listed on new board. They are already listed overseas in other bourse, Chinese new tech board is much more focused on real economy supporting enterprises that develop core and strategic technologies for China’s national development.
According to CSRC, Chinese’ largest management firms including China Asset Management and China Southern Asset Management were the first institutions allowed to launch funds that focus on the new board. Actually, the seven funds approved so far can all subscribe to the retail portion of new shares offered on the technology board, while one fund will also have access to the institutional tranche.
Right now, another 70 funds are awaiting Shanghai bourse regulatory system approval. According to the new rules, companies listing on the new board can trade freely for the first five days and will be subject to a 20% limit before is halted the 6th day of trade. These trading caps were useful in preventing excessive ramping of share prices avoiding the boom-to – bust cycles risk.
In details, as SCMP revealed, unprofitable companies that have a minimum of 300 million yuan ($US44.6 million) of sales in the previous year are also eligible to file an IPO application. Pre-revenue biotech firms that have a market value of at least 4 billion yuan (US$595.5 million) are also eligible if they obtain licences from the national drug authorities. Of course, the Shanghai exchange will review IPO applications, conducting a careful screening on earnings and operations before granting share listing approvals.
Hong Kong and New York used to enjoy advantages over exchanges in Shanghai and Shenzhen, where companies had to pass stricter regulatory criteria to gain listing approval.
The most crucial change is the adoption of a registration – base listing system, which replaces the pronged regulatory vetting that kept many companies waiting for more than a year before listing. Chinese leadership finance policy direction points to a faster and freere way for companies to go public, plus, CSRC new regulations let Shanghai bourse greater freedom to attract promising technology amid growing competition from rival exchanges including New York or Hong Kong.
Economists agree with the statement about China adopted and decided Shanghai new tech board after Shenzhen and Hangzhou hi-tech giant Tencent and Alibaba chose to ust their saìhares on US bourses.
Morehover, analyzing CSRC regulatory system, is logic to assume how the new Chinese board is much more focused on real economy supporting enterprises that develop core and strategic technologies for China’s national development. Actually, e-commerce names such as Alibaba are not listed on new board. The reason is easy to explain.
First, companies such as Alibaba, Baidu, Tencent or Tik Tok, are already listed overseas in other bourse, plus, e-commerce companies have know-how and technologies to be competitive with western competitors, but they mostly oriented on consumers. Without doubts, firms such as Cainiao helped the automation of logistic sector in China, but comuses-oriented enterprises are not eligible for Cinese hi-tech race.
Right now, the new Shanghai hi-tech board will be launched at the beginning of June, but there are still uncertain over execution, timeline and core criteria of this new board. Without doubt People’s Republic new Nasdaq-style tech board will be a game-changer. The new rules already fuleded hopes among players and investors.