China to Pilot Registration System on Start-up Board ChiNext for Capital Market Restructuring

(Source: ChinaVisual)

China Securities Regulatory Commission (CSRC) announced the launch of a pilot registration system for ChiNext, the NASDAQ-style growth enterprises board at the Shenzhen Stock Exchange, outlining the pilot adoption of a registration-based IPO system. 

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CSRC will stop accepting applications for IPOs on ChiNext under the new listing mechanism. Companies seeking an IPO on ChiNext no longer require approval from the CSRC. SZSE will review company filings and decide whether they are qualified to list. The market will decide on the pricing and timing of new share sales. 

The scheme was approved during a meeting overseen by President Xi Jinping, who stressed the need to deepen the reform of the capital market and enhance its functions with structural reforms, state media CCTV said Monday night.

The registration-based system will improve the market’s transparency and authenticity, and allow investors to make their own judgments, said CSRC in an announcement on Monday. However, it did not give a timeline for when the new regime would be adopted. 

The daily price limit for share movements is adjusted to 20% from the current 10% in either direction. Trading can be suspended for 10 minutes under extreme movements of 30% and 60%. There will be no price limits in the first five trading days. 

Investors who have applied for trading permissions on ChiNext should have assets in both securities and capital accounts no less than RMB 100,000 within 20 trading days, and have been participating in trading for more than 24 months.

The new listing process will make the mainland’s IPO market more attractive to tech start-ups as the country battles an economic slump, providing much-needed capital to virus-hit companies amid the outbreak.

Shenzhen-based ChiNext is home to 807 companies with a total market value of 6.75 trillion yuan.