On Nov. 5 2018, Chinese president Xi Jinping delivered a speech at the opening ceremony of the first China International Import Expo in Shanghai. He proclaimed that the Shanghai Stock Exchange is ready to launch the “Science and Technology Innovation Board” with a registration-based system for listed companies.
After a lot of preparation as well as the release of relevant policies and regulations, from Mar. 18 2019, Shanghai Stock Exchange (SSE) began to accept applications.
What is the Science and Technology Innovation Board?
Four years ago, the Shanghai government launched a “Strategic Emerging Board” and “Technology Innovation Board”. The two boards were originally planned to serve mid-size companies in relatively developed industries. But due to too many restrictions, the two new boards didn’t launch as planned.
The Science and Technology Innovation Board is based on the two previous failed boards. This new board and the registration-based system are designed to help growth-oriented technology innovation enterprises with their finances, and hope to become the Chinese version of Nasdaq.
The new board will relax company restrictions, and companies don’t need to be profitable to apply. Instead, they must have core technology or research results. This new registration-based system comes from that of Nasdaq, and security regulator only checks the legitimacy of the company, other factors such as company industry, revenue and prospects are not mandatory for applicants. Although the application threshold is low, company details must be fully disclosed so that investors can access everything they need to know about the company. This method ensures transparency, and can better help companies and protect investors.
Why does China need the Science and Technology Innovation Board?
With the high speed growth of the Chinese economy, unicorns and growth-oriented technology enterprises appear in many industries. Many companies of this kind have a large market share, however, due to some restrictions concerning revenue and company prospects, it is hard for them to go for IPO or raise money.
The new board will enable more high-quality companies and unicorns to raise money, and help them gain more support. At the same time, this can offer more opportunities for investors and investment agencies.
Who has joined the Science and Technology Innovation Board?
As of today, there are already two batches of companies that have submitted applications for the IPO on the Science and Technology Innovation Board. According to the SSE website, 17 companies have been accepted thus far.
The sectors of those companies include high-end equipment, bio-medicine, new material, new energy and information technology. Most companies come from Yangtze River Delta region and Pearl River Delta region, with prominent geographical advantages due to the advanced manufacturing industry in those regions.
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