China's Nasdaq-style high-tech board will welcome red-chip companies, companies with unconventional shareholding structures and even those in deficit, according to rules published by the China Securities Regulatory Commission (CSRC).

CSRC and the Shanghai Stock Exchange (SSE) released the draft regulations and guidance for the high-tech board at SSE. According to the new rules, the listing criteria are less stringent and trading rules are more flexible.

The high-tech board was proposed by President Xi Jinping in November last year as part of the effort to encourage innovation. The plan was approved in the meeting of the Central Committee for Deepening Overall Reform this month. The approval aims to support key core technological innovations and to improve the economic capacity for serving the real economy.

The new board will mainly focus on companies in technology and emerging sectors, such as high-tech manufacturing, new energy, biotechnology, big data, and cloud computing.

“A few aspects that have been made clear in the guideline, as the board will focus on companies in high-tech and strategically emerging sectors such as new generation information technology, advanced equipment, new materials, new energy, and biomedicine. These key technologies will lead the future, and companies with their own capacities in intellectual property could better develop,” said Liang Futao, the head of research at V. Stone Fund.

The new board will provide more flexible rules to attract promising technology start-ups, among the growing competition from other exchanges including Hong Kong.

Red-chip companies, companies on the Chinese mainland incorporated outside Chinese mainland and listed in Hong Kong, foreign-funded Chinese mainland companies structured as variable interest entities (VIE) will all be allowed to list on new board through the issuance of Chinese depositary receipts (CDR). The board also gives green lights to money-losing startups and companies with a dual-class shareholding structure.

Apart from easing rule for listing companies, there is also a bigger room for trading.

The new board will allow shares to fluctuate by a maximum of 20 percent on any single trading day, which is different from the rules for the current boards, where shares are capped at a daily maximum of 10 percent.

On top of that, SSE also considered any potential negative circumstances as it tried to ensure the smooth running of the new board.

“Investors are concerned about whether there will be negative impacts on existing boards, such as some low-quality stocks may be hurt by the diversion of funds from the existing boards. This could mean there will be better resource allocation as financing resources will concentrate more on listed companies with higher quality and growth potential,” said Liang.