China officially launches technology innovation board, with trading expected to begin within two months

Daniel Ren
China officially launches technology innovation board, with trading expected to begin within two months

Beijing has officially launched its new technology innovation board, which is being dubbed China’s Nasdaq-style market.

Huang Hongyuan, chairman of the Shanghai Stock Exchange, told the Lujiazui Forum in Shanghai that some companies will be traded on the new “STAR Market” board within two months.

The launch comes as the US-China trade war has spread to the technology sector, threatening huge home-grown stars like Huawei and others.

The idea behind the board is to encourage investment in domestic tech innovators, ensuring they have resources to develop and also have an incentive to list at home. It also will make those companies easy for mainland investors to trade in, after complaints that Chinese mega stars like Alibaba, parent company of the South China Morning Post, chose to list in the US rather than at home.

Vice-premier Liu He pressed the button at the Lujiazui Forum to start the much-hyped new tech board.

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Insiders expect a first batch of more than 20 companies will debut on the board within a month of actual trading beginning.

Already, the Shanghai exchange has approved six firms to float shares on the board, including Shenzhen ChipScreen Biosciences, Anji Microelectronics (Shanghai) and Suzhou Tztek Technology. Some of the companies on the board eventually will be selected to trade on the Hong Kong-Shanghai Stock Connect, providing access to additional money from investors outside of the mainland.

“We will fully enforce a share offering system that is based on information disclosure, supporting the growth of technology firms to make breakthroughs in innovations in core technologies,” Yi Huiman, chairman of the CSRC, said at the launch.

He said difficulties remain in reforming the mainland’s capital market, but the launch of the tech board will help the regulator to ensure fairness and transparency.

The new board, touted as a groundbreaking move to reform China’s capital markets, is a pet project of President Xi Jinping. In November, Xi announced that he wanted a new tech board at the Shanghai Stock Exchange to support the country’s technological innovations.

It will adopt a registration-based initial public offering (IPO) system to facilitate companies’ fundraising.

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Under the new IPO mechanism, companies are required to fully disclose information about their earnings and operations while regulators will give them a green light once they ensure the truthfulness of the information.

The market will decide the worth of companies.

As securities regulators have been gearing up for the tech board launch, US-China relations have worsened.

The tit-for-tat US-China trade war, which extended into the technology sector in May, is prompting Beijing to ramp up support for home-grown technology firms.

In the fields of chip making, biotechnology, and computer software, Chinese companies are facing the prospect of being strangled by the US administration as it accuses China of stealing its intellectual property.

The leadership hopes the new market will play a role in nurturing the growth of China’s own world-class players in key technology areas.

The new market will allow unprofitable technology firms to raise funds on mainland stock exchanges for the first time.

Pre-revenue biotech firms with rosy growth prospects are also welcome to join the board.

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