On Thursday (9/2), Chinese President, Xi Jinping said that his country would establish a new stock market in Beijing to service shares or listing companies in the category of small and medium-sized enterprises (SMEs). President Xi Jinping declared, according to CNN Business, that he wants to create a space for "service-oriented" and "creative" firms. This policy would be implemented by "deepening the reform of the New Third Board and establishing the Beijing stock exchange as the major platform supporting innovation-oriented SMEs," he said on Tuesday (9/7), as reported by Reuters. The National Equities Exchange And Quotations (NEEQ), also known as the New Third Board, is a trading system that replaced two previous trading systems for trading shares of public limited businesses that are not listed on the Shenzhen or Shanghai Stock Exchanges. Companies were compelled to disclose additional information about their activities as part of the system. This is meant to improve market transparency and shorten the time it takes for IPOs to go through regulatory review. China currently has two stock exchanges, Shanghai and Shenzhen, both of which are located far from Beijing. The Shanghai Stock Exchange has been in operation since 1990 and is home to a number of big corporations, including state-owned enterprises, banks, and energy businesses.
Owning Xi Jinping's settlement to enhance a Beijing stock exchange, China stocks surged significantly on Monday (9/6). The blue-chip CSI300 index rose 1.9% to 4,933.73 points, and the Shanghai Composite Index rose 1.1% to 3,621.86 points. Furthermore, an index tracking major firms listed on Beijing's New Third Board (NTB) increased by 13%, while Shanghai's tech-focused STAR Market and Shenzhen's start-up board ChiNext both increased by more than 2%. "We believe that the new Beijing Stock Exchange (BSE) offers a reassuring message that China will continue to support technologically innovative small and medium-sized enterprises (SMEs) to tap capital markets for financing," one of the analysts in Citi said in a note on Monday (9/6). Aside from the stock market situation, which exhibits a positive sign, Chinese Vice Premier Liu He also stated that the private economy must be supported and that guidelines and policies for supporting the private economy have not changed and will not change in the future. In addition, China's central bank and financial regulators indicated over the weekend that they would enhance high-level financial sector opening by optimizing institutional arrangements and improving regulations, according to the official China Daily. As investors predicted that China's new bourse would increase their underwriting business due to this announcement, the brokerage subindex rose 2.9%. Besides positive catalysts from this announcement, the healthcare sub-index soared 4.5% after losing 18.4% in July and August, and the new energy vehicle sub-index jumped 4.5%.
The plan of making a stock exchange in Beijing is also to attract foreign investors. As reported from Reuters, on Tuesday (9/7), the government reasoned that the establishment of the capital market was to anticipate the United States' plan to suppress Chinese issuers who did not comply with the regulations there. "Openness and cooperation are inevitable trends in the integrated development of global capital markets," said Chairman of the Securities Regulatory Commission (CSRC) Yi Huuiman. For now, China is still studying further steps, including expanding the scope of the stock connection scheme linking China and Hong Kong. This will enhance the Shanghai-London Stock Connect program. In addition, China will also improve domestic listing rules for overseas entities, as well as regulations on listing Chinese companies overseas. It promised to maintain Hong Kong's status as a global financial center. "Beijing supports the listing of domestic companies in Hong Kong," Fang said. The move was announced as Chinese companies face hurdles to regulatory capital markets in America. Chinese authorities are also increasingly exasperated with technology companies going public overseas over concerns about whether they can give foreign governments access to sensitive user data. The creation of the new exchange will be Xi Jinping's second policy in the stock market sector after previously launching a technology-focused board for startups on the Shanghai Stock Exchange.
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