The STAR Market, China’s Nasdaq-style tech board, started trading Monday, with the first batch of 25 tech companies listed.
The most eye-catching innovation is the registration-based initial public offering (IPO) system, marking a gradual maturation of China’s securities issuance over the past 20 years.
This IPO mechanism is developed from China’s examination and approval system and authorizing system. Under the previous systems, an issuer needs to apply for listing and submit materials for the supervision department to review. Then the commission would allow it to go public after making a judgment on the authenticity of the materials and the investment value.
The pilot registration-based IPO system, on the other hand, relies on information disclosure by issuers, which is a common practice in western stock markets. The market itself will decide the value of the companies.
Experts say after more than 20 years’ development, Chinese stock market is mature enough to try on the new system in the STAR Market.
“Trying the new system in the newly-established sci-tech innovation board means smaller risks and more intense reform. If it goes well here, we can promote it. The STAR Market is a point for breakthrough and a test field for reform,” said Li Jizun, director of market department under the China Securities Regulatory Commission.
The new sponsorship system is another highlight of the STAR Market. The securities brokers have to invest their recommended stocks, which connects the interests of broker, private investors and listed companies together.
“We established a system to connect the sponsor qualification with the quality of information disclosure. If the sponsor institution performs badly, we will suspend its practicing qualification in the STAR Market. If the circumstances are especially serious, we will suspend its practicing qualification on the Main Board or the Growth Enterprise Market,” said Gao Runheng, a divisional head of the Institutional Department of China Securities Regulatory Commission.