China offers itself a third stock exchange: after the shopping centers of Shanghai and Shenzhen, which have existed since 1990, the new stock exchange will settle in Beijing. This was announced by the head of state and head of the Chinese party Xi Jinping in a brief speech at the opening of a trade fair.
The move comes at a time when Chinese authorities are increasingly regulating private companies. Companies considering IPOs overseas should expect difficulties. The most recent example is the popular transport service provider Didi: Days after the multi-billion dollar debut in New York City, authorities banned downloading of the Didi app for competition reasons and ordered a investigation. Beijing executives are also concerned that tech companies going public overseas could give foreign authorities access to sensitive user data.
Two years ago, on Xi Jinping’s initiative, the so-called Star Market was created in Shanghai to encourage Chinese start-ups to go public in the People’s Republic. Instead of going to the United States or Hong Kong, promising Chinese companies must be listed in their home country. Until then, the rule was: only those who are profitable for three consecutive years will be considered by the Chinese stock exchange regulator to issue shares. The Star Market, on the other hand, is much more flexible. There are now more than 300 technology companies listed in Shanghai, with a total market capitalization of over 4.7 trillion yuan.
Beijing’s new stock market is to be based on an existing over-the-counter trading system to fund small and medium-sized businesses, the securities regulator reported. The so-called national stock exchange and quotations (NEEQ) based in the Chinese capital must be reclassified as “third stock exchange”. This direct trading center was launched in 2013 to open up new financing possibilities for small and medium-sized businesses. These companies play “an important role in the promotion of economic growth, the promotion of scientific and technological innovation and the development of employment,” according to a statement from the Securities Commission. The new exchange is expected to promote China’s “innovation-driven development strategy”. By the end of 2020, more than 6,000 companies were listed on the Beijing NEEQ, 94% of which were small and medium-sized enterprises with a market capitalization of around 345 billion euros.