IPO reform on start-up board spurs capital market vitality

Eighteen start-up companies went public Monday on the Shenzhen Stock Exchange under a new Initial Public Offering (IPO) system, releasing more of the vitality of the country's capital market.

Photo taken on Aug. 24, 2020 shows the bell-ringing ceremony during the listing ceremony of the first batch of registration-based initial public offerings (IPOs) of enterprises debuted on the ChiNext board at Shenzhen Stock Exchange in Shenzhen, south China's Guangdong province. [Photo/Xinhua]

The companies were listed under the registration-based IPO system, which aims to simplify and shorten the previously lengthy approval process for IPO issuance and enhance the capital market's inclusiveness to innovation and start-up firms.

The move was the latest example of Chinese authorities delivering on their promise to cut red tape and boost innovation.

As part of the country's capital market reform, the new IPO system, which is expected to better cultivate start-ups and bolster the real economy, came one year after China's Nasdaq-style sci-tech innovation board, also known as the STAR market, was inaugurated on July 22 last year.

With the rapid development of China's economy, more companies are seeking financial support from the capital market. However, many emerging companies were barred from accessing the market due to an approval-based IPO system, which features a high access threshold.

Last July, the STAR market was launched and first piloted the registration-based IPO system, in an effort to ease the listing criteria for innovation-oriented enterprises while adopting higher requirements for information disclosure.

In April, the registration-based reform for ChiNext, China's other NASDAQ-style board for growth enterprises, proposed by the Shenzhen Stock Exchange and China Securities Regulatory Commission, was approved.

With a focus on information disclosure, the new IPO system will improve the market's transparency and authenticity, as well as allowing investors to make their own value judgments.

Analysts said the reform has not only provided a listing path for loss-making companies and companies with a dual-class share structure, but also rolled out different listing criteria for profitable, non-profitable and red chip ones.

"The highlight of the reform on ChiNext features a more pragmatic and inclusive mechanism, which will facilitate the listing of innovation-powered firms and allow these emerging but unprofitable companies and companies with a special shareholding structure to further expand with the strength of the capital market," said Yu Lingqu from the Shenzhen-based think tank China Development Institute.

ChiNext was established in 2009 with 28 listed companies on its market. Over the past decade, ChiNext has seen a rapid expansion of listed companies, especially in scientific and technological sectors. So far, it has attracted more than 800 companies, accounting for over 20 percent of the A-share market, with a total market value of nearly 7 trillion yuan (around US$1 trillion).