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China unveils rules on tech-innovation board and registration-based IPO system

China has officially released regulations for a Nasdaq-style technology and innovation board that promises to smooth the way for IPOs of technology start-ups and, if successful, could raise Shanghai’s profile as a capital-raising competitor to Hong Kong and New York.

The stock market regulator late on Friday published the rules for the tech-innovation board after considering opinions from the public on draft regulations that were introduced on Jan. 30, which took effect immediately.

A registration system will be applied to new listings on the board, which will limits official powers to control the timing of IPOs, a practice that Chinese companies have to want for years to get a public listing.

What’s new for the board is that some companies that are not yet profitable will be allowed to go public, which alleviate two major impediments to companies seeking to tap existing equity capital markets in China.

The change of the rule came after many best-know Chinese technology firms, including Alibaba Group Co Ltd and Tencent Holdings, chose to raise funds in overseas markets, due to requirement for profitability in China’s A-share market.

New York and Hong Kong accounted for nearly 70 per cent of the money raised through Chinese IPOs last year.

In another sign plans for the new board are progressing, the financial news website Caixin reported that the Shanghai Stock Exchange had completed recruiting employees for the board and they were slated to start work in mid-March.

According to the document, the authority will give priority to three types of companies in getting listed on the new board – technology companies whose business in line with the national strategy, companies in information technology, high-end equipment, new material, new energy, environmental protection and bio-pharmaceutical companies as well as internet, big data, cloud computing, artificial intelligence companies, in particular those that have been deeply integrated with the manufacturing sector.

In addition, according to the rules, the authority urges underwriters to give priority to technology companies in seven fields:

  • information technology, including semi-conductor and integrate circuit, electrionic information, information network, artificial intelligence, big data, cloud computing, new software, internet, internet of things and smart hardware;
  • high-end equipment, including smart manufacturing, aerospace, advanced rail transportation, marine engineering equipment;
  • New material, including advanced steel material, advanced non-ferrous metal material, advanced petrochemical and chemical new material, advanced inorganic non-metallic materials, high-performance composite material, frontier new material;
  • New energy, including advanced nuclear power, big-scale wind power, high-efficiency optic-electro and optic-thermal and high-efficiency energy storage;
  • energy conservation and environmental protection;
  • bio-pharmaceutical;
  • others

 

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