Beijing Stock Exchange: China will create a new financing center in the country’s capital

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President Xi Jinping on Thursday announced the Beijing-based exchange at an international fair and said he wanted to create a venue for “service-oriented” and “innovative” companies. He did not say when the exchange would be established.

China already has two stock exchanges, but they are located in Shanghai and Shenzhen, far away from Beijing. The Shanghai Stock Exchange, founded in 1990, mainly hosts large-cap companies, including state-owned enterprises, banks and energy companies. The Shenzhen Stock Exchange has a larger proportion of technology companies and small or medium enterprises.

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

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It is also the second time Xi has personally announced a stock market initiative. In 2018, as the trade war between the United States and China erupted, it unveiled a technology-focused board for startups on the Shanghai Stock Exchange. He creation of the Star Market it intended to channel investment into China’s high-tech enterprises and help the country gain an edge in its competition with the West for technology. Since then, more than 300 technology companies have been listed on the board, with a total market cap of more than 4.7 trillion yuan ($ 728 billion).

The government also established a free sale system in Beijing in 2013 to trade shares of non-listed companies in Shanghai or Shenzhen. It is called the National Equities Exchange And Quotations (NEEQ) and is widely known as the “New Third Council” in China. However, the NEEQ has lagged behind the Shanghai and Shenzhen markets in recent years, reducing its size and liquidity. Some Thursday he pledged to reform the NEEQ system.

The China Securities Regulatory Commission (CSRC), the country’s main securities regulator, later explained that the new Beijing Stock Exchange will be built on top of the NEEQ. Companies selected from the NEEQ can qualify for listing on the Beijing Stock Exchange, added the regulator.

The CSRC also said the Beijing Stock Exchange will complement the Shanghai and Shenzhen stock exchanges and will focus on serving “innovative” small and medium-sized enterprises.

The registration-based IPO system that China piloted in Shanghai two years ago will be applied to companies that want to include it in the new stock market as well, he added. This system requires companies to make even more disclosures about their operations. Its intention is to improve market transparency and reduce an otherwise lengthy regulatory review for IPOs.

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