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Agricultural Development Bank of China
Industry

China establishes Beijing Stock Exchange to boost high-quality development of innovative enterprises

September 09, 2021


Abstract : The Beijing Stock Exchange Co., Ltd., whose establishment was officially announced on the 2021 China International Fair for Trade in Services (CIFTIS) and registered on September 3, will be a likely accelerator to expedite cultivation of innovative small- and medium-sized enterprises (SMEs) in China.

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Photo taken on September 7, 2021 shows the site of a press conference at the media center of the 2021 China International Fair for Trade in Services. (Xinhua/Chen Zhonghao)

BEIJING, Sept. 9 (Xinhua) -- The Beijing Stock Exchange Co., Ltd., whose establishment was officially announced on the 2021 China International Fair for Trade in Services (CIFTIS) and registered on September 3, will be a likely accelerator to expedite cultivation of innovative small- and medium-sized enterprises (SMEs) in China.

By starting a new chapter in deepening the reform of China's capital market, the bourse will significantly enhance the service functions of China's National Equities Exchange and Quotations (NEEQ), better known as the new third board, more efficiently nurture innovative SMEs, and more accurately address the issues of financing difficulty and affordability encountered by innovative SMEs.

-- The ABCs of Beijing Stock Exchange

Official registration

Officially announced on the 2021 CIFTIS on September 2, the establishment of the Beijing Stock Exchange came into being one day later along with its official registration with one billion yuan of registered capital.

Public information showed that the exchange is wholly owned by the National Equities Exchange and Quotations Co., Ltd., whose chairman Xu Ming and general manager Sui Qiang have been named chairman and general manager of the Beijing Stock Exchange, respectively.

On September 3, China Securities Regulatory Commission (CSRC), the country's securities watchdog, issued a notice on its website to solicit public comments on a slew of trial rules relating to registration of initial public offerings (IPO) on Beijing Stock Exchange and management of the bourse.

Despite having only one shareholder, market watchers held that possibility for the Beijing Stock Exchange Co., Ltd. to introduce other state-owned shareholders or go public like the stock exchange of Hong Kong can not be excluded in the future. 

Source of listed companies

To establish the Beijing Stock Exchange, all the existing companies listed on the select tier of NEEQ will be transferred into listed companies on the Beijing Stock Exchange and new companies to be listed on the stock exchange will come from eligible listed companies on the innovation tier of NEEQ, said officials with CSRC at a press conference on September 3.

Currently, China's new third board has three tiers for companies to trade their equities, namely the select tier, innovation tier and base tier, among which the select tier-listed companies boast larger size and better competitiveness than those listed on the other two tiers.

As one of the above-mentioned trial rules for public comments shows, the IPO issuer on the Beijing Stock Exchange shall be a company that has been listed on the NEEQ innovation tier continuously for 12 months.

Registration-based IPO to be piloted

The Beijing Stock Exchange will pilot the registration-based system for public securities offering so as to implement the relevant requirements of the 14th Five-Year Plan (2021-2025), according to CSRC.

Upon its official launch, application for a listing on the Beijing Stock Exchange will be based on a registration-based system similar to that on the Science and Technology Innovation Board (STAR Market) of the Shanghai Stock Exchange (SSE) and ChiNext market of the Shenzhen Stock Exchange (SZSE).

During the transition period before operation of the Beijing Stock Exchange, however, the approval based-acceptance and review of firms to be listed on the NEEQ select tier will still be applied.

Trading system

According to CSRC, continuous auction will be implemented for the Beijing Stock Exchange. No price limit will be set on the first day of trading of new shares, but a 30 percent ceiling for the price rise and fall will levied from the second day of trading to increase market flexibility.

Date of launch

As the CSRC will end the public opinion inviting for its trial rules related to the Beijing Stock Exchange on October 3 and said on September 3 that there would be more for public comments, market critics said that the bourse may be open for trading within this year.

Transfer of stock listing

The existing board-transfer rules for NEEQ select tier-listed companies will be adhered to and the future Beijing Stock Exchange-listed companies that have grown mature can choose to list on the SSE or SZSE.

Delisting mechanism

Generally, the CSRC will maintain a market ecology that allows for entry and exit and listing and delisting as well together with establishment of a diversified delisting indicator system, optimization of regular delisting and immediate delisting rules.

In the future, companies delisted from the Beijing Stock Exchange that meet certain conditions can continue to be traded on the innovation tier or basic tier of NEEQ. But companies that have incurred major violations of rules and regulations must be delisted from the stock market directly, according to CSRC.

-- A "booster" to promote high-quality growth of innovative enterprises in the new phase of development

The establishment of the Beijing Stock Exchange is highly consistent with the current needs of China's economic development, said He Xiaoyu, chief economist with Zhengxin Investment Group.

Establishing the bourse, which marks yet another masterpiece of China's capital market reform, will significantly increase the number of listed companies in China, noted He, highlighting that it will become a "booster" for promoting high-quality growth of innovative enterprises in China.

China has presently stepped into a new phase of high-quality development, requiring inherently continuous improvement of its innovation system so as to nurture and grow new drivers for innovative development. 

Currently, China has 140 million market entities and most of them are SMEs which play a significant role in driving the country's economic growth, promoting technological innovation and increasing employment. Compared to large enterprises and mature enterprises, however, innovative SMEs still face difficulties in getting sufficient financing.

Establishing the Beijing Stock Exchange is part of the purpose of the new third board reform, said Shao Yu, chief economist at Orient Securities.

Despite being an independent company, the Beijing Stock Exchange is still a part of the new third board and will become an "upgraded version" of the new third board together with the innovation tier and basic tier, said He. 

Since its operation in 2013, China's new third board has become a key financing platform for SMEs, but to better propel innovative development of SMEs, it is necessary to deepen the NEEQ reform, overcome the institutional development bottleneck and accelerate the building of an exchange tailored for innovative SMEs, thought He.

Since 2018 when China launched the plan to cultivate specialized and new "little giant" enterprises, there have been around 783 specialized and new "little giant" companies that are listed or were once listed on the new third board. Year to date, six such "little giant" companies are listed on the NEEQ select tier.

As establishment of the exchange comprehensively lifted the development positioning of innovative SMEs, the Beijing Stock Exchange is highly expected to become the primary base for turning "little giants" into "hidden champions", reckoned Shao.

For the future, Shao is optimistic about the future of the new third board in serving innovative SMEs. 

Apart from these, He believed that the establishment of the bourse will also help balance the regional development and increase the influence of northern markets. 

By far, the coordinated development of the three stock exchanges has created an interdependent capital market system connected in an orderly manner, which extends its coverage of service to the Pearl River Delta, the Yangtze River Delta and the Beijing-Tianjin-Hebei region as well and fuels development of SMEs across China, He said. (Edited by Duan Jing with Xinhua Silk Road, duanjing@xinhua.org)

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Keyword: SMEs CIFTIS B&R Weekly Beijing Stock Exchange

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