In a speech on 2 September at the opening of the China International Fair for Trade in Services (CIFTIS), Chinese President Xi Jinping said that China will open a new stock exchange in Beijing to serve “innovative” small and medium enterprises (SMEs).
Xi did not say when the new bourse would be established, but in a statement issued after the speech the China Securities Regulatory Commission (CSRC) said its leadership was “excited” at the prospect, would study the president’s proposal in depth and resolutely implement it, adding that “small and medium-sized enterprises can do great things.” It explained that the new exchange would help deepen financial supply-side structural reforms and improve capital market systems.
China currently has two stock exchanges, in Shanghai and Shenzhen. The Shanghai Stock Exchange was established in 1990 and is the world’s 3rd largest stock market by market capitalisation. As Asia’s largest exchange, it hosts mainly large-cap companies including state-owned corporations such as utilities, banking, insurance, and energy firms. In contrast, the Shenzhen Stock Exchange focuses primarily on technology companies and small to medium-sized corporations.
An over-the-counter system, called the National Equities Exchange And Quotations (NEEQ) was established in Beijing in 2013 for trading shares of companies not listed in Shanghai or Shenzhen and is widely known in China as the “New Third Board”. The China Securities Regulatory Commission explained after Xi’s speech that the new Beijing stock exchange will be built on the top of the NEEQ with selected companies from the NEEQ able to qualify to list on the new exchange.
The CSRC added that the registration system for the exchange would be similar to Shanghai’s STAR market, which is regarded as China’s answer to the technology-heavy Nasdaq platform in the US.
Although details of the new stock exchange have not yet been disclosed, the move comes amid the Chinese government’s regulatory crackdown on large private enterprises in an attempt to control their increasing power and influence. Earlier this month the Chinese government signalled the crackdown would continue as it unveiled a new five-year plan outlining tighter regulation of much of its economy.
Chinese companies are also coming under additional scrutiny in the United States with the Securities and Exchange Commission (SEC) implementing new measures requiring stricter disclosures about potential risks from companies wishing to list or raise capital on US exchanges.
