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'First-choice listing venue for innovative SMEs'

Updated: Oct 11, 2021 By Zhou Lanxu China Daily Print
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People wait outside the China Securities Regulatory Commission, which released draft rules of the Beijing bourse. [Provided to China Daily]

In addition to the easier listing thresholds, the BSE will lend support to the cash-thirsty SME sector on the grounds of a shortened IPO time frame and reduced issuance costs, Li said.

This is because the BSE has adopted the registration-based system, which streamlines the IPO review process. For BSE-listed companies, the bourse also offers easier financing channels, including the mechanism that a couple of issuances can be made through one issuance registration, Li said.

Many NEEQ-traded firms have stepped up efforts to tap into the development opportunity offered by the BSE, including Roit, which entered the NEEQ Base tier in 2015.

"We are confident that we will maintain an average annual growth of 50 to 70 percent in revenue in the coming three years," Tong said. "Our confidence is backed by our research and development fruits as well as the expected financing boost from the BSE."

Ben Jinfeng, chairman of Jilin Boda Pharmaceutical Co Ltd, said the generic drugmaker based in Liaoyuan, Jilin province, whose controlling stake is held by Cloudview Capital, plans to raise money via the NEEQ first and then file for an IPO on the Beijing bourse to empower its business transformation.

According to Ben, although the company entered the NEEQ Base tier in 2017, it still relied primarily on its own cash flow for R&D due to lackluster financing conditions on the NEEQ. The lack of external financing has combined with the company's undiversified product line to restrict its growth.

To address the developmental bottlenecks, Ben said the company has undergone major adjustments and requires hundreds of millions of yuan in external financing over the next three years to transition from a generic drugmaker to one that also specializes in innovative medicine development.

"The BSE is likely to play a big role in facilitating our financing plan," Ben said. "The bourse has not only made it easier for the company to be listed in the future but also to obtain financing at present as it has boosted PE and VC investors' interest in smaller firms."

Calvin Fu, chief economist at the International Financial Centre Federation, said, "All in all, the establishment of BSE is a significant step for China in strengthening financial support for the building of the new development paradigm."

The paradigm, in which the domestic market is the mainstay while the domestic and international markets support each other, stresses achieving sustainable and inclusive growth, a process that entails thriving innovative industries and a booming SME sector, Fu said.

Fu added that the lack of liquidity that once plagued the NEEQ is unlikely to be replicated on the BSE, thanks to its legal status as a real exchange and enhanced arrangements to boost liquidity, such as lightened investment thresholds.

Any retail investor qualified to trade on the BSE should have at least 500,000 yuan worth of assets in securities accounts, a reduction from 1 million yuan of the NEEQ Select, according to the bourse.

The registration-based system of the BSE may also improve from those trialed in Shanghai and Shenzhen, as the new bourse will leverage more of the market mechanism in screening information disclosure, said Xiao with China Renaissance Securities.

According to Xiao, market players are expected to supervise the disclosure quality of a firm during at least one year of NEEQ trading before it files for an IPO. Doing so will help strengthen its quality of information disclosure later as a listed company.

Nevertheless, experts still called for more institutional innovations to ensure the bourse is a success, especially when it comes to introducing more qualified investors, ensuring listed companies' quality and safeguarding investor protection.

"Though highly anticipating the BSE, many investors will still take a wait-and-see approach and await its actual market performance," Xiao said.

To make the bourse a strongly competitive listing venue, Xiao said he is hopeful that it will provide enough tolerance to applicants' financial performance fluctuations in the IPO review process and make institutional innovations to attract foreign investors who are experienced in growth startup investments.

Hu Yuanyuan and Wang Weihan contributed to the story.

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