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China to establish strategic emerging industries board, improve capital market

Wednesday, December 23, 2015 - 21:56

[BEIJING] China will establish a strategic emerging industries board on the Shanghai Stock Exchange and make changes to all layers of capital markets to give companies easier access to funding, the State Council said on Wednesday.

The new board will set higher thresholds for listing candidates than Shenzhen's Nasdaq-style ChiNext in terms of financial conditions and market capitalisation, the Shanghai Stock Exchange said earlier this year.

The State Council will increase the number of companies listed on the "New Third Board", the country's most active over-the-counter equity exchange, and explore a pilot programme that will allow companies listed on the New Third Board to transfer to ChiNext, the cabinet said in an online statement after its weekly meeting.

As part of efforts to speed up financial reforms, the cabinet said it would gradually allow qualified financial institutions to apply for securities licences as long as risks generated from such operations are sufficiently isolated, and would explore the mixed operation of securities, fund and futures companies.

The cabinet also said it would expand the China Insurance Security Fund's investment in the capital market, and enhance the investment and financing capability of trust companies and bank wealth management funds.

Laws and regulations related to start-up firms with "special ownership structure" will be improved, the cabinet said, in a bid to promote domestic listing.

Many Chinese companies, including technology start-ups and Internet giants such as Alibaba Group Holding Ltd, Baidu Inc and Tencent Holdings Ltd, have adopted the so-called variable interest entity (VIE) structure.

As foreign ownership in China's Internet sector is blocked and start-ups have difficulty meeting profitability requirements to list onshore, the VIE structure was developed to satisfy the ownership requirements of overseas security regulators without breaking Chinese law.

REUTERS

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