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Growth enterprise market guidelines released

CHINA'S securities watchdog released guidelines on the long-awaited growth enterprise market today paving the way for a launch of the new financing platform for start-up companies.

The so-called GEM is to be patterned after the Nasdaq market in New York, with an emphasis on smaller, cash-strapped technology companies that show solid growth potential. It will have lower listing thresholds than the main boards in Shanghai and Shenzhen.

Companies seeking listing on the board must have run their business for more than three years and have net assets of at least 20 million yuan, the China's Securities Regulatory Commission said today on its Website. The guidelines will take effect on May 1.

Listing candidates will also need to show two consecutive years of profits with combined earnings of at least 10 million yuan, or have revenue of at least 50 million yuan and a profit of at least 5 million yuan for the last fiscal year.

The companies' share capital must exceed 30 million yuan after selling shares, the commission said.

A spokesperson for the commission said the board was an important measure to help China build multi-level capital markets and promote the development of innovative companies with high growth potential.

The regulator will begin accepting applications from candidates after issuing related rules and setting up a reviewing committee, the spokesperson said, without revealing a launch date for the new board.

Financial institutions have become more cautious about offering loans to start-ups during the financial crisis, so the new board offers a new finance channel for smaller companies to survive the downturn, TX Investment Consulting Co said in a report.

The board is a key measure that can help China secure economic growth as smaller companies account for 99 percent of the number of all the companies in China and offer 75 percent of the jobs, the report said.

China began considering the board in Shenzhen more than a decade ago but the process was halted after the global dotcom bubble burst in 2000.

In 2004, the country launched the small and medium-enterprise board in Shenzhen which has looser rules than the main board in Shanghai but stricter rules than the upcoming board.


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