The long-awaited second-board market, or China’s Nasdaq for high-tech startups, is unlikely to debut this year, although most of the framework has been hammered out, leading Chinese economist Wu Jinglian said.
“The second-board market is unlikely to be established this year as the new policies and relevant regulations must be approved by the National People’s Congress first,” Wu, a research fellow with the State Council’s Development Research Center, said yesterday at the ongoing 2000 China Guaranty Forum in Shanghai.
“The existing securities and corporate laws are not applicable to the new growth enterprise market,” he noted.
Wu also dismissed the media reports that individual investors need at least 300,000 yuan (US$36,100) to open an account and that each transaction should involve at least 50,000 yuan.
The criteria were believed to discourage retail investment in the highly risky second-board market.
While the development of China’s main exchanges in Shanghai and Shenzhen - where most of the listed companies are large state-owned ones - were adversely impacted by “non-market forces,” Wu hoped the new market will be market-oriented from the very beginning.
“In fact, the second-board market should become a channel not only for startups to raise capital but also for venture capital investors to withdraw,” Wu said. “Venture capitalists usually won’t be engaged in long-term corporate management.”
Unlike large state-owned companies, which have long been controlled by the government, a number of China’s privately owned small firms have been neglected in terms of both policy and financial support.
While seeking to float shares is one way for technology-savvy firms to raise capital, credit guarantees are regarded as another important conduit for smaller firms to get credit line.
“The difficulty of raising capital has been a long-standing problem for smaller companies in China,” said Deputy Finance Minister Zhang Youcai at the forum. “Credit guarantees will provide much help.”
China is in urgent need of setting up a corporate credit-worthiness database, which is critical for a shift from a centralized economy to a socialist market economy.
Problems such as limited government subsidies and government directions remain.
Zhang suggested the government earmark more funds to help foster the development of small firms.
Wu also discussed the much-heralded listing of China’s four largest state-owned banks.
“Unlike other companies, banks shouldn’t take the form of listing the quality assets only,” Wu said.
(eastday.com 10/13/2000)
