SHANGHAI/HONG KONG (Reuters) – Chinese President Xi Jinping unveiled plans on Monday to launch a technology board in Shanghai that will adopt a loosely-regulated mechanism for initial public offerings (IPOs), potentially competing with Hong Kong, or even New York.
FILE PHOTO – People walk under an electronic board showing stock information at the Shanghai Stock Exchange in Lujiazui Financial Area in Shanghai, China, September 22, 2015. REUTERS/Aly Song
The announcement on the “technology innovation board”, to be established by the Shanghai Stock Exchange, comes as Beijing is stepping up support toward the private sector, and encouraging innovation, to mitigate the impact of the Sino-U.S. trade war.
Xi announced the decision at the start of the China International Import Expo in Shanghai, but gave few details, only saying the new board will adopt a registration-based IPO system. Under the current system, all mainland IPOs must be vetted by regulators.
Suggesting a lower listing threshold, the Shanghai Stock Exchange said in a statement on Monday that the new board will make “more appropriate and differentiated arrangements” regarding companies’ profitability and shareholding structures, and will be more inclusive toward innovators.
“This could be China’s Nasdaq,” said Yang Hai, analyst at Kaiyaun Securities.
“It will post a challenge to Hong Kong,” he said, adding Shenzhen’s tech-heavy ChiNext board could also feel the pressure.
Chinese and Hong Kong bourses have stepped up their competition to attract tech firms seeking IPOs. Earlier this year Hong Kong introduced rules allowing companies with dual-class shares to list in the city, while China pursued Chinese Depositary Receipts (CDRs) as a way to entice overseas-listed Chinese tech giants to list domestically.
Adopting a western-style registration-based IPO system would give market forces a dominant role in deciding when a company can sell shares publicly, removing regulatory hurdles facing many Chinese listing