Expansion of the new third board will ease financing woes

By Lan Xinzhen
0 Comment(s)Print E-mail Beijing Review, January 3, 2014
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A trader in Hangzhou, capital of Zhejiang Province, watches the board to check on his investments [Long Wei/Beijing Review]



In December 2013, almost all of the securities companies in China received an emergency notification from the National Equities Exchange and Quotations (NEEQ), which encouraged securities companies to be ready for the listing of qualified companies after the NEEQ was expanded. All qualified joint-stock companies across the country can apply to the NEEQ, the so-called "new third board," for trading. The document says innovation-based, and growing micro-, small and medium-sized enterprises are particularly encouraged to participate.

The State Council issued a statement on December 14, allowing all domestic micro-, small and medium-sized enterprises to be listed on the NEEQ. Previously, only small and medium-sized enterprises (SMEs) from four hi-tech industrial parks in Beijing, Tianjin, Shanghai and Wuhan could be traded on the board.

In the United States and other developed countries, there are sound over-the-counter (OTC) systems for unlisted joint-stock companies, but in China, the new third board is just starting to take shape.

Seven year wait

According to the State Council's arrangement, qualified domestic enterprises can transfer their shares via the NEEQ and conduct equity financing, debt financing and reorganization. Companies registered in China but listed abroad can issue preferred shares via the NEEQ. Companies listed on the third board can apply for initial public offerings (IPOs) on the Shanghai and Shenzhen stock exchanges if they meet the requirements.

When China's securities market was established in 1992, the corporate-owned shares of listed companies were prohibited from trading on the A-share market. The country then set up the Securities Trading Automated Quotations System (STAQ) and the National Exchange and Trading System (NET) for the trading of corporate-owned shares. But due to a conflict with the Securities Law of 1999, the two systems had to be closed.

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