Chinese Stock Exchanges and Capital Markets
China’s stock exchanges — the Shanghai Stock Exchange (SSE), the Shenzhen Stock Exchange (SZSE), and the Beijing Stock Exchange (BSE) — constitute the world’s second-largest capital market by market capitalization. The exchanges have evolved from experimental institutions serving state-owned enterprise reform to sophisticated capital markets that include dedicated boards for technology companies and SMEs.
Shanghai Stock Exchange (SSE)
The Shanghai Stock Exchange, established in 1990, is China’s main board market. The SSE lists the largest state-owned enterprises, financial institutions, and blue-chip companies. The SSE operates two boards: the Main Board (Zhu Ban) for large, established companies; and the STAR Market (Ke Chuang Ban), established in 2019 to serve technology and innovation enterprises.
The SSE Main Board requires: a minimum of three years of continuous operation; minimum post-IPO market capitalization of RMB 500 million (general) or RMB 1 billion (financial sector); minimum revenue of RMB 100 million in the most recent year; profitability requirements (cumulative net profit of RMB 30 million over the most recent three years); and positive cash flow from operations.
STAR Market (SSE Sci-Tech Innovation Board)
The STAR Market (Keji Chuangxin Ban), launched in June 2019 as part of China’s capital market reform, is designed for companies in high-tech and strategic emerging industries. The STAR Market implemented significant regulatory innovations, including: registration-based IPO system (replacing the previous merit-based approval system); differentiated voting rights (weighted voting rights structures); no profitability requirement (companies may list with negative earnings); simplified IPO procedures; and market-based pricing.
The STAR Market has attracted many of China’s leading technology companies, including semiconductor manufacturers, AI companies, and biotech firms. The registration system has reduced the time to IPO and has increased the number of companies accessing public capital markets. The STAR Market’s success has provided a model for the subsequent reform of the Main Board and ChiNext.
Shenzhen Stock Exchange (SZSE)
The Shenzhen Stock Exchange, established in 1990, operates the Main Board, the SME Board (Zhongxiao Qiye Ban), and ChiNext (Chuangye Ban). The SZSE has focused on serving smaller companies and technology enterprises, reflecting Shenzhen’s role as China’s technology innovation hub.
ChiNext, established in 2009, is China’s growth enterprise market. ChiNext listing requirements are less stringent than the Main Board: a minimum of two years of continuous operation; minimum post-IPO market capitalization of RMB 100 million; revenue of RMB 50 million in the most recent year; and cumulative net profit of RMB 50 million over the most recent two years. ChiNext has listed over 1,000 companies and has been a significant source of venture capital and private equity exits.
Beijing Stock Exchange (BSE)
The Beijing Stock Exchange, established in September 2021, serves as a capital market platform for small and medium-sized enterprises (SMEs). The BSE transformed the former National Equities Exchange and Quotations (NEEQ) Select Tier into a formal stock exchange. The BSE’s listing requirements are tailored to the characteristics of SMEs, including: minimum two years of operation; minimum post-IPO market capitalization of RMB 200 million; and minimum net profit of RMB 10 million in the most recent two years.
The BSE’s establishment reflects the government’s policy objective of improving access to capital markets for SMEs, which employ the majority of Chinese workers and contribute significantly to economic growth. The BSE has adopted simplified disclosure requirements and lower compliance costs for listed companies.
NEEQ (New Third Board)
The National Equities Exchange and Quotations (Xin San Ban) is China’s over-the-counter market for unlisted public companies. The NEEQ was established in 2013 to provide capital market access for companies that do not meet the listing requirements of the SSE or SZSE. The NEEQ is divided into three tiers: the Basic Tier, the Growth Tier, and the Select Tier (which formed the basis for the BSE).
The NEEQ has been a significant innovation in Chinese capital markets, providing: a listing venue for over 7,000 companies; a mechanism for price discovery and capital raising for unlisted companies; and a pathway to Main Board listing. However, the NEEQ has suffered from low liquidity, limited investor participation, and inadequate valuation mechanisms.
Listing Requirements
General listing requirements across Chinese exchanges include: incorporation and operations in China; compliance with the Securities Law; audited financial statements; a clear business plan and sustainable business model; a qualified board of directors and independent directors; internal control systems; and disclosure systems.
Specific requirements vary by exchange and board. Profitability requirements are the most significant discriminator: the Main Board requires profitability, while the STAR Market and ChiNext offer alternative listing standards based on market capitalization, revenue, and research and development expenditure. The trend is toward more flexible listing standards that accommodate the characteristics of innovative companies.
Regulatory Framework
Stock exchange regulation is governed by the Securities Law (Zhengquan Fa, 1998, comprehensively revised 2019) and administered by the China Securities Regulatory Commission (CSRC). The 2019 revision introduced the registration-based IPO system; increased penalties for securities violations; strengthened investor protection; and expanded the regulatory powers of the CSRC. The CSRC oversees the exchanges, approves listing applications, enforces securities laws, and protects investor interests.