The Chinese financial landscape is undergoing significant transformations, particularly with its multilevel capital marketsThese changes are aligned with the various phases of the real economy’s development and are intended to stabilize economic growth, support technological innovation, and guide high-quality development through enhanced capital dynamicsOn December 14, 2024, Wu Qing, the Party Secretary of the China Securities Regulatory Commission (CSRC), presided over a meeting where key directives from the Central Economic Work Conference were conveyedThis meeting emphasized the necessity to push forward with reforms in the stock issuance registration system, especially focusing on the Sci-Tech Innovation Board, the Growth Enterprise Market, and the Beijing Stock Exchange.

The push for reform on the Sci-Tech Innovation Board represents a critical area of focus, especially aimed at elevating the efficiency of market support for technological advancements

As of June 19, 2024, a series of reforms have been proposed to better cater to high-level scientific self-reliance and the development of new productivity paradigms, putting a strong emphasis on “hard technology.” These initiatives aim to enhance inclusivity in the regulatory framework while aligning with the growth trajectories of cutting-edge industries.

One of the notable outcomes of the reforms is the introduction of the “Eight Guidelines for the Sci-Tech Innovation Board.” These guidelines accommodate the unique characteristics of enterprises engaged in new productivity sectors and facilitate smoother processes for mergers and acquisitions, along with an improved framework for equity incentivesExperts have noted that the adoption of these guidelines significantly boosts capital market precision and adaptability, providing crucial support to high-end equipment firms seeking industry consolidation and ownership incentives.

Since the implementation of the newly reformed Sci-Tech Innovation Board, its operational framework has proven conducive to technological innovation

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With its diversified and inclusive listing requirements, it aids companies of varying sizes and developmental stages in meeting their financing needsThis adaptability has enabled the rapid integration of high-quality tech enterprises into the capital marketThe introduction of criteria supporting “asset-light and high R&D input” companies further illustrates this commitment, allowing boards to help companies utilize additional funding specifically for research and development efforts.

Following the introduction of the Eight Guidelines, a surge of Initial Public Offerings (IPOs) has been observed within the Sci-Tech Innovation Board, contributing to a total of 6.8 billion yuan raised from eight companies across sectors such as semiconductors, photovoltaics, new materials, biomedicine, high-end equipment, and software developmentNotably, companies like Jiachi Technology, specialists in stealth materials, and Pioneer Precision, a leading player in semiconductor equipment, embody the spirit of the “specialized, refined, differential, and innovative” enterprises taking to the board and striving to break international monopolies.

Statistical records indicate that since the Eight Guidelines were officially instituted, several exemplary cases have emerged across various dimensions like IPOs and M&A activities

For instance, on July 16, 2024, Puyuan Precision Electronics received CSRC approval for its asset purchase through share issuance, with the entire process culminating in merely two monthsThis transaction involved Naishu Electronics, which saw an incredible appreciation rate of over 900%. Such instances reflect the strong R&D capabilities and abundant talent resources characterizing these emerging tech enterprises, which are further backed by supportive policies enhancing their valuation during mergers and acquisitions.

Looking forward, the Sci-Tech Innovation Board is committed to its mission of properly servicing high-quality technological firmsIt aims to seize the imminent opportunities presented by a new wave of technological revolutions and industrial transformationsPlans are laid out to refine diverse aspects of the issuance and listing mechanisms, as well as the restructuring processes to ensure all-encompassing support for superior tech enterprises

This enhancement will also focus on better-guiding capital resources towards technology-driven initiatives while fortifying governance through improved information transparency.

Simultaneously, the Beijing Stock Exchange is actively fostering small and medium-sized enterprises (SMEs), encouraging them towards specialized and refined developments in alignment with new productivity paradigmsAs it stands now, over 90% of listed companies on the Beijing Stock Exchange qualify as high-tech enterprisesSimilarly, the share of strategic emerging industries and advanced manufacturing within these listings is nearing 80%. Notably, more than half of the national-level “small giants” have been showcased here, with 10 companies earning certifications as national “single champions” and 16 recognized by different national awards for technological advancements.

Further to these effects, the Beijing Stock Exchange continues to tackle the shortcomings in capital market services by facilitating financial resources to flow towards innovative SMEs

The structure of the market has expanded, enhancing service coverage while also fostering direct financing opportunitiesAs it stands, over 80% of the listed companies are SMEs and nearly 90% are privately held enterprisesThis upward trajectory underlines the coordinated efforts with the New Third Board and local equity markets to fulfill the distinct needs of SMEs at varying stages of their growth.

This concerted push towards inclusive finance is also reflected in the operational decisions being undertaken by the Beijing Stock ExchangeWith nearly 600 enterprises sourced from county regions and over 200 from ethnically diverse areas within its stock realm, it has made substantial strides in aiding local economic transitions and employment opportunitiesWith a market median earnings ratio set at 17, the average financing per enterprise sits around 200 million yuan, leading to total funding of over 53 billion yuan directed towards 251 SMEs.

In moving forward, leaders in the exchange have signaled a fortified commitment to enhancing their support for tech innovation

This will involve adjusting listing standards, refining approval mechanisms, and broadening the range of financial products availableThe overarching aim is to ensure resilience in capital market service delivery, particularly for technological advancements and specialized industries.

As the capital market system continues to evolve — from establishing the Sci-Tech Innovation Board to merging the Shenzhen mainboard and small- and medium-sized boards — greater clarity has emerged within the multifaceted capital market structureConsequently, resource allocation has become more seamless, leading to an optimized environment for the A-share marketThe multi-level capital market system in China represents a model of complementary developmental trajectories, as stated by Yang Chenguang, chief economist at Shenzhou Huayuan Securities, emphasizing the distinctive roles of different boards in servicing varying company sizes and industry sectors.

As the National Committee of the Chinese People's Political Consultative Conference discusses continued reforms, it is crucial to ensure the careful development of tiered trading mechanisms and strengthen regional equity markets to promote consistent growth across all capital market segments