Following the government’s recent step to assist high-quality development of the industry, analysts and market insiders said China’s capital market will better serve sci-tech innovation and support new quality productive forces.
On Wednesday, China’s top securities regulator revealed eight fresh policies aimed at furthering reform of its Nasdaq-style Science and Technology Innovation Board (STAR) market of the Shanghai Stock Exchange.
According to the China Securities Regulatory Commission (CSRC), the measures give the listing of companies who have made breakthroughs in new industries, new business patterns and new technology top attention.
The CSRC promised to increase institutional inclusiveness and support high-quality tech companies that are yet to make profits to list on the STAR market considering that businesses with new quality productive forces often demand high and sustained investment and face uncertainty in research and development and commercial application.
Speaking regarding the new measures at the Lujiazui Forum in Shanghai on Wednesday, CSRC Chairman Wu Qing said these measures aim to highlight the “hard-tech” characteristics of the STAR board, improve the mechanisms of issuing and underwriting, mergers and acquisitions, equity incentives and trading, and better serve sci-tech innovation and the development of new quality productive forces.
“Only by establishing a favorable environment that encourages invention and tolerates failure can we promote the development of new quality productive forces,” Wu remarked.
“These eight measures will have a very positive impact on the development of the STAR market, and the support of the capital market to sci-tech innovation,” declared Shanghai Stock Exchange chairman Qiu Yong.
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Launched in 2019, the STAR market has grown to be the ideal listing venue for “hard-tech” companies—that is, those in the hi-tech and strategic emerging industries like novel materials, advanced equipment, next-generation information technology, and new energy.
With a combined market capitalization of nearly 5 trillion yuan (approximately 702.29 billion U.S. dollars), 573 firms have thus thus far been listed on the STAR market. Said Qiu, the overall raised through IPOs comes to nearly 1 trillion yuan.
Said Yang Chao, a senior analyst of China Galaxy Securities, the policies will help the growth of new businesses and sci-tech innovation, so injecting fresh vigor and development momentum into the market.
Regarding refinancing, the recently released policies lighten criteria for enterprises with low assets and large R&D expenditure, so enabling them to get market money, Liu Zhangming, a senior researcher at Founder Securities, said.
Liu pointed out that the better inclusivity of digital companies in these policies will support their long-term and sensible growth as well as their financing environment and profit quality.
Apart from the eight fresh policies proposed by the CSRC, the State Council General Office also published on Wednesday 17 new measures to enhance the function of the capital market in enabling fresh quality creative forces.
Covering five main themes, the policies address nurturing more venture capital (VC) organizations, increasing capital sources, boosting regulatory guidance and differentiated oversight, enhancing exit possibilities, and thus optimizing the market environment.
International professional investment institutions and teams will receive support in order to create renminbi funds in China, thereby leveraging their investment experience and complete service advantages.
Fostering invention, industrial expansion, and financial stability depends on long-term capital flowing into VC investment being encouraged. China would thus assist insurance companies in investing in VC funds based on market criteria using guidelines based on market principles.
According to Yingke PE, the guideline gives all-around support for the good evolution of the VC sector and boosts industry trust.
According to a research released by an institute under ChinaVenture, China’s VC and private equity markets witnessed a total of 8,322 new funds launched last year with a subscribed size of new funds reaching 614.06 billion U.S. dollar.
More long-term finance will be available on the market to support early development phase small technology enterprises. This would enable a virtuous cycle among finance, businesses, and technologies as well as among CSRC Chairman Wu Qing told the Lujiazui Forum.
Shayne Heffernan
