In the News: Beijing SME Exchange; BNP Paribas Wealth; and Hainan Asset Management

September 07, 2021 | BY

Vincent Chow &Hugo Yeung

Beijing stock exchange hosting innovative SMEs announced; BNP Paribas in talks to launch majority-owned wealth management venture; and Hainan to trial cross-border asset management operations

New Beijing Stock Exchange Hosting Innovative SMEs Announced

On September 2, President Xi Jinping announced the creation of a new Beijing Stock Exchange that would host innovative SMEs. The China Securities Regulatory Commission (CSRC) published draft rules on September 3 and is currently soliciting public opinions until October 3.

The new Beijing exchange comes as part of reform to Beijing's National Equities Exchange and Quotations (NEEQ) commonly known as the "New Third Board," an over-the-counter platform for professional traders to trade equity in its 7,299 listed SMEs. Currently, companies on the NEEQ are divided into three tiers – Base, Innovative, and Select – based on quality. The new exchange looks to receive SMEs at Innovative and Select Tiers which have been listed on the NEEQ for no less than 12 months. The new exchange would adopt a registration-based IPO system as is currently adopted by Shenzhen's ChiNext and Shanghai's STAR markets. Under this U.S.-styled system, companies would apply directly to the exchange under listing rules as opposed to seeking approval from the CSRC.

The new exchange aims to facilitate direct financing of SMEs and is expected to be welcomed by SMEs who often face difficulties raising capital due to their lack of assets. This move comes at a time when China is looking to inject capital into the stock market to boost economic recovery all the while reducing reliance on debt financing. Some have voiced concern over whether this move will divert capital away from the Shanghai and Shenzhen exchanges, or even Hong Kong if the new exchange hosts foreign-listed companies. However, others, including Chinese state officials, are more optimistic and contend that the new exchange will be complementary in function and would help in building a multi-layered capital market system—pointing to the possibility for Beijing-listed companies to seamlessly migrate to Shanghai or Shenzhen once they have matured.

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