China Kicks Off IPO Reform For Shenzhens Startup Board ChiNext

China on Monday kicked off a reform to fast track initial public offerings (IPOs) on Shenzhen’s start-up board ChiNext, as Beijing accelerates capital market restructuring to reinvigorate an economy ravaged by coronavirus.

The scheme to launch a U.S.-style, registration-based IPO system on ChiNext was approved during a meeting overseen by President Xi Jinping, who stressed the need to counter economic headwinds with structural reforms, state broadcaster CCTV said.

China is stepping up efforts to channel much-needed capital into virus-hit companies and innovative start-ups as Beijing battles an economic slump and competes for technological supremacy with the United States.

Reforming the ChiNext is a key step toward building “a disciplined, transparent, open, vibrant, and resilient capital market,” CCTV reported. It did not give a timeline for the new regime to be adopted.

China first introduced the registration-based IPO system in Shanghai’s Nasdaq-style STAR Market, launched last July, and plans to replicate the board’s success in other markets.

Under the new listing mechanism, companies seeking an IPO no longer need approval from the China Securities Regulatory Commission (CSRC), greatly shortening the waiting period.

Instead, the stock exchange will vet ChiNext IPO applications based on disclosure rules, expected to be revamped under the new mechanism. The market will decide on the pricing and timing of new share sales.

A streamlined listing process would make China’s IPO market more attractive to tech start-ups as Shanghai and Shenzhen compete with other listing venues such as Hong Kong and New York.

China’s ChiNext, launched roughly a decade ago in the southern town of Shenzhen, is currently home to 807 companies with total market capitalization of 6.78 trillion yuan ($958 billion).

Reuters