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HomeNewsBeijing Stock Exchange: China will create new finance center in nation's capital

Beijing Stock Exchange: China will create new finance center in nation’s capital

President Xi Jinping announced the Beijing-based exchange at an international trade fair on Thursday, saying he wanted to create a place for “service-oriented” and “innovative” businesses. He did not specify when the exchange would be established.

China already has two stock exchanges on the mainland, but they are located in Shanghai and Shenzhen, far from Beijing. The Shanghai Stock Exchange, which was established in 1990, mainly hosts large-cap companies, including state-owned enterprises, banks, and energy companies. The Shenzhen Stock Exchange has a greater proportion of technology companies and small and medium-sized enterprises.

There is also the Hong Kong Stock Exchange, but it is subject to its own legal and regulatory systems and is not subject to Beijing’s capital controls.

The move comes as the Chinese government’s regulatory crackdown on large private companies intensifies. Beijing has been working for almost a year to harness its power and influence.

And it is being announced as Chinese companies face regulatory hurdles as they attempt to raise funds in the United States. The pressure is coming from Chinese authorities who are increasingly upset that tech companies are going public overseas over concerns over whether they could give foreign governments access to sensitive user data. Meanwhile, US regulators have stepped up their scrutiny over Chinese IPOs and demanded more stringent disclosures about potential risks.
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It is also the second time that Xi has personally announced a stock market initiative. In 2018, as the US-China trade war raged, he unveiled a tech-focused board for startups on the Shanghai Stock Exchange. The creation of the Star Market aimed to channel investment into Chinese high-tech companies and help the country gain the edge in competing with the West on technology. Since then, more than 300 tech companies have joined the board, with a total market capitalization of over 4.7 trillion yuan ($ 728 billion).

The government also set up an over-the-counter system in Beijing in 2013 for trading in shares of unlisted companies in Shanghai or Shenzhen. It is called National Equities Exchange And Quotations (NEEQ) and is widely known as the “New Third Board” in China. However, the NEEQ has lagged behind the Shanghai and Shenzhen markets in recent years, shrinking in size and liquidity. Xi pledged Thursday to reform the NEEQ system.

The China Securities Regulatory Commission (CSRC), the country’s main securities regulator, later explained that Beijing’s new stock exchange would be built on top of the NEEQ. Selected NEEQ companies can qualify to be listed on the Beijing Stock Exchange, added the regulator.

The CSRC also said that the Beijing stock exchange will complement the Shanghai and Shenzhen stock exchanges and focus on serving “innovative” small and medium enterprises.

The registration-based IPO system that China piloted in Shanghai two years ago will also be applied to companies seeking to list on the new exchange, he added. This system forces companies to make even more disclosures about their operations. It aims to improve market transparency and reduce an otherwise lengthy regulatory review for IPOs.

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