Draft regulations for the Shanghai Stock Exchange’s highly anticipated science and technology innovation board are likely to be released in less than two weeks, according to industry insiders.
The draft is very likely to be released by the end of this year, said Liu Xiaodong, CEO of Sailing Capital Management and former deputy general manager of the Shanghai Stock Exchange, at the Shanghai Finance Forum on Dec 15.
Xu Jiongwei, chairman of China Securities Investment Co Ltd, said that prior to the new tech board, Chinese regulators had set stricter requirements for companies intending to go public, resulting in a limited number of qualified companies.
But, based on current market discussions, it seems regulators will set lower bars for such companies.
“The biggest change will be profit. In the past all A-share listed companies had to report profit for a certain period of time. But it is widely assumed the new board will also take into account the company’s income rather than simply profit, which indicates the system’s higher inclusiveness,” Xu said.
But, he added that one major problem that could hold back profitable companies is the new tech board’s liquidity.
During his keynote speech at the China International Import Expo on Nov 5, President Xi Jinping elaborated on three decisions on the development of Shanghai, one of which is the introduction of a science and technology innovation board at the Shanghai Stock Exchange.
Shanghai Party Secretary Li Qiang said that the science and technology innovation board should focus on key areas such as integrated circuits, artificial intelligence, biomedicine, aerospace engineering and electronic vehicles. He made the comments during a meeting with the Shanghai Stock Exchange management team on Nov 20.
The Shanghai municipal government released a guideline on Nov 22 to support the development of high-tech companies in the city. Qualified companies will be granted financial support of between 200,000 yuan and 2 million yuan ($29,000 and $290,000). Local companies intending to go public on the new board should complete their application by Nov 23.
Shao Jun, chairman of DT Capital Partners, said that domestic Chinese investors will for the first time benefit from the exponential growth of the industry leaders in the technology area.
“In the past, profits raised by the rapid growth of industry leaders like Alibaba and Tencent were given to overseas limited partners and shareholders. They planned to return to the Chinese market after growing into juggernauts, which is not right. China has created these miracles, and the profit generated during their most rapidly evolving period should be given to domestic investors,” he said.