There has been a lot of hype around China’s blossoming financial sector, which is going through significant changes these days.
Last year, the country launched its answer to Nasdaq – the Shanghai bourse’s Star Market – which became a pilot project for the whole multi-trillion-dollar mainland’s stock market. Among the features of the new trading platform were a simplified listing mechanism (often called the ‘registration-based system’), higher investor thresholds and a more diverse menu of listing standards.
The venue was created as a pilot project for the entire public equity ecosystem. All its ‘novelties’ were thereby meant to be adopted countrywide later on. In the last week of 2019, the National People's Congress Standing Committee approved (in Chinese) the date of this transformation coming into force.
The new regulations took effect, as scheduled, on March 1, 2020.
Besides the removal of the inefficient (and, in practice, terribly slow) procedures that every potential A-share company must go through while queueing for an IPO, the new system has a number of other traits.
For one, from now on, applicants seeking listings on the Shanghai and Shenzhen exchanges are required to disclose their recent financial results in detail. The state has also increased measures of punishment for illegal behavior, such as fraud and insider trading. Companies caught red-handed will face fines of up to CNY 10 million (USD 1.43 million), while individuals will be required to pay 2 to 10 times the value of their ill-begotten gains.
The China Securities Regulatory Commission (CSRC), the country’s top capital market watchdog, will seemingly have less work to do under the new system: it is no longer in charge of double-checking the applications during the vetting process.
According to the local media report (in Chinese), there are over 160 million individuals who are currently holding A-shares in China. The new law is designed to protect their interests and, at the same time, move the financial market forward.