China is getting a third stock exchange: after the trading centers in Shanghai and Shenzhen, which have existed since 1990, the new stock market is to be set up in Beijing. This was announced by China’s head of state and party leader Xi Jinping in a short speech at the opening of a trade fair.
The move comes at a time when the Chinese authorities are increasingly regulating private companies. Companies planning IPOs abroad must expect difficulties. The most recent example is the popular transport service provider Didi: a few days after the multi-billion dollar debut in New York, the authorities prohibited the download of the Didi app for competition reasons and ordered an investigation. The leadership in Beijing also fears that technology companies that go public abroad could give foreign authorities access to sensitive user data.
Two years ago, on the initiative of Xi Jinping, the so-called Star Market was set up 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 are to be listed in their home country. Until then, the rule was: Only those who are profitable for three years in a row 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 more than 4.7 trillion yuan.
The new stock market in Beijing is to be based on an existing over-the-counter trading system to finance small and medium-sized companies, the securities regulator reported. The so-called National Equities Exchange and Quotations (NEEQ) based in the Chinese capital is to be upgraded to the “third exchange”. This direct trading center was launched in 2013 to open up new financing options for small and medium-sized companies. These firms play “an important role in promoting economic growth, advancing scientific and technological innovation and expanding employment,” a statement from the securities commission said. The new exchange should promote China’s “innovation-driven development strategy”. At the end of 2020, more than 6,000 companies were listed on the Beijing NEEQ, 94 percent of them small and medium-sized companies with a market capitalization of around 345 billion euros.