CSRC new chairman on sci-tech board and IPO reform

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China's new science and technology innovation board will test capital market reforms and requires much stricter disclosure, China Securities Regulatory Commission (CSRC) chairman Yi Huiman said during his debut press conference on Wednesday.

The CSRC rules are close to the end of public consultation, Yi said. The aim of launching the sci-tech board is to enhance the inclusiveness of the capital market and to better serve the real economy.

Different from the existing Chinext startup board and the over-the-counter board, the new board is intended to build an Initial Public Offering (IPO) system with information disclosure at its center and gain reform experience that can be “duplicated and rolled out."

Setting up a registration-based sci-tech board is a major institutional innovation. The board has made many innovations in share offerings, listing, trading and de-listing.

The board's loosening of rules on eligibility of companies to be listed, including the relaxation of profit requirements, comes with the condition that information disclosure will be tightened, which is the core of testing registration-based IPOs, said CSRC Vice Chairman Fang Xinghai Wednesday.

SCIO press conference on Wednesday. /VCG Photo

Registration scheme requires stricter due diligence by underwriters. Stock pricing and sales measure the quality of an investment bank. "I'm concerned that Chinese local investment banks and brokerages do not have enough experience in those services. I hope they can brace for the challenge,” Yi said.

He added that the CSRC would improve the legal framework and law-based regulation, push forward the amendment to the Securities Law and other related laws and regulations, and severely punishes those who break the laws and regulations in the equity market.

Yi said China would eliminate the hurdles for social security funds, insurance funds, and pension funds to enter the stock market, to push forward the reform and opening up of China's capital market and further improve the trading mechanism.

Huang Hongyuan, Chairman for Shanghai Stock Exchange, doesn't think there will be an influx of tech board IPOs. He said that Beijing, the Yangtze River Delta, Pearl River Delta, Wuhan, Chengdu and Xi'an have the most qualified high growth companies, which are mostly in information technology, biotech, high-end manufacturing and new materials with big R&D investments.

China's total financing via the capital markets stood at 7.1 trillion yuan in 2018. 150 IPO authorized last year raised a total of 137.8 billion yuan. Bond insurance on the exchange-traded bond market reached 5.69 trillion yuan, a 45-percent increase from last year. Merger and acquisition deals amounted to 2.58 trillion yuan, a 38-percent increase from last year.

(CGTN's Xia Cheng contributed to this story)