China is in the midst of launching a stock exchange in Beijing, according to a statement made by the country’s President Xi Jinping earlier this month. Given that the Asian country already has three stock exchanges (two continental, in Shanghai and Shenzhen, and another in Hong Kong), the logical question would be for what purposes a new bag is being opened.
The bag of Shanghai It is the largest and oldest in China and serves as a platform mainly for large state-owned companies. In the bag Shenzhen smaller companies are listed. The bag of Hong KongAlthough it has a variety of Chinese companies registered, it is subject to different regulations and legislation since it is an area that enjoys some autonomy from the mainland.
In 2013, the Government launched a extra-bursatile system in Beijing for the sale of shares of small and medium companies not registered in Shanghai or Shenzhen. It is precisely this platform that will serve as the basis for the new exchange.
The goal officially announced by President Xi is to support the growth of small and medium-sized enterprises “innovation-oriented”, which will be able to attract investment by putting their shares on the market.
“This is a clear example of Beijing’s intention that markets serve the real economy and specifically to its long-term development goals, “Rory Green, Head of China Research at TS Lombard, commented a The Financial Times.
Between the back and the wall
The main problem for Chinese companies is that US regulators are demanding more from them. transparency If you are looking to go to the US stock exchanges.
Last March, the U.S. Securities and Exchange Commission (SEC) adopted the Foreign Companies Liability Law, according to which firms identified by the SEC will require an audit by a US watchdog and must demonstrate that they are not owned or controlled by an entity governmental in a foreign jurisdiction. Likewise, companies will have to indicate which members of the board of directors are officers of the Communist Party China, if any.
China, in turn, demands from its companies more data security, preventing them from disclosing information to US regulators. Thus, China decided restrict listing of its companies on foreign exchanges, so that as of July 10, entities with one million users or more must have the approval of the Chinese Cyberspace Administration to be listed on foreign securities markets.
Some experts believe that the establishment of a new exchange heralds the induction or coercion to large companies listed abroad to return to mainland China.
“If large companies are delisted in the US and registered in China, on the Shanghai or Shenzhen stock exchanges, the volatility caused to those existing exchanges will be too great. While this will not be a problem in a new exchange,” commented the columnist focused on political science and finance, Zhang Tianliang, informs The Diplomat.