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March 9, 2018

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Reform to share listing to invigorate capital market

CHINA’S securities regulator is set to reform stock exchange listing to invigorate the country’s capital market and foster the new economy.

Jiang Yang, vice chairman of China Securities Regulatory Commission, said reform to the listing mechanism was the top priority for the regulator.

The CSRC will reform the listing mechanism, deepen reform of the main board and ChiNext board, and support “new technology, new industry, new industry forms and new business models,” Securities Daily cited Jiang as saying.

Analysts have said that if implemented, the reform will reverse a trend in recent years which saw many Chinese tech firms prefer to list overseas because of more flexible listing rules and access to international investors.

Jiang’s remarks came amid a slew of government statements that vowed changes to the listing process to grant easier access to emerging and innovative businesses.

As China tries to transition its economic growth model to an innovation-driven model, the last thing that the CSRC wants to do is to turn away firms in the new economy sector, which has contributed to a growing share of the economy.

But China’s capital market remains dominated by traditional industries such as property development, finance and industrial materials.

Innovative firms, tech startups in particular, face legal and technical barriers to list on the A-share market, including curbs on weighted voting rights, or dual-class shares, and mandatory requirements on IPO applicants’ profitability.

Companies are now required to have a net income for the last three fiscal years and have combined profits of over 30 million yuan (US$4.7 million) during the period to list on the main board. The conditions are lower to list on ChiNext, but still challenging for most tech startups.


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