Editor's note: The article was first published by China Plus on July 23, 2019. The article does not necessarily reflect the views of CGTN.

China’s answer to the Nasdaq, the sci-tech innovation board STAR, started trading on Monday, heralding the start of a new phase in the development of China’s capital market. It took a little over 200 days for China to implement its plan to establish the STAR market with its registration-based initial public offering (IPO) system. The relatively short period was not only in response to the country’s urgent need to nurture homegrown science and technology enterprises, but also reflects China’s determination to further deepen reform of its capital market.

The STAR market is designed to be a test bed for China’s capital market reform. Unlike other domestic boards, the registration-based IPO system, which is a popular practice in many developed markets, cuts listing application red tape, allows more market-based pricing, prioritizes information disclosure and tightens delisting rules. Trading rules also differ as the STAR market has no price change limits within the first five trading days. After that, the board allows stocks to rise or fall by a maximum of 20 percent, higher than the 10-percent limit for most stocks on other boards.

On the first day of trading, the share prices of all the first batch of 25 companies listed on the STAR market went up, displaying investor confidence in the new market. The share prices of some companies fell after the initial surge. Such fluctuations are normal on comparable markets. As a newcomer to the Chinese capital market, STAR includes a number of start-up firms which haven’t yet formed stable sources of profits. They do however have strong growth potential as these firms are mainly engaged in emerging industries such as biomedicine, semiconductor and new energy. Analysts suggest investors may need to show a little more patience before seeing better returns.

An essential role of the capital market is to serve the real economy. The STAR market will help attract the flow of capital toward high-quality science and technology enterprises, stimulate the ability to innovate, and the competitiveness of enterprises, and thus promote industrial upgrading and transformation as well as the development of the new economy.

The launch of the STAR market provides further evidence of China’s determination, confidence and willingness to take action to deepen economic and financial reforms and further open its markets to foreign investors. If the enthusiasm shown by the investors on the first day of trading is anything to go by, such a dynamic and resilient capital market with great potential will become a real booster in propelling China’s high-quality development.

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