Beijing Stock Exchange: President Xi Jinping’s pet scholarship is here

The stock exchange was first announced by the head of the Communist Party of China in September and is intended to help small and medium-sized businesses raise capital.

The first batch of 81 companies started trading on Monday, including 10 initial public offerings from technology and manufacturing companies. Shares of those IPOs surged at breakers open and knocked, before closing with an average price increase of 200%.

Automotive component maker Tongxin Transmission was the top performer with a staggering 494% gain. The other 71 Beijing-listed companies previously traded over-the-counter for unlisted companies on China’s major Shanghai and Shenzhen stock exchanges.

The launch of the exchange is of strategic importance to Xi’s economic and political vision. It is the first time that a stock exchange has been established in Beijing, giving the capital and political center of the country more influence in the world of business and finance.
It comes at a time when Xi is taking on some of the country’s biggest tech giants, which until recently were growing at an almost breakneck pace. The Communist leader’s campaign aims to ensure that wealth and capital are not concentrated in the hands of a few behemoths in the industry.
The launch of BSE could provide some relief to companies in the tech sector, which face significant regulatory hurdles from the United States and China to raise funds overseas.

Help new and small businesses

When Xi first announced the idea of ​​a Beijing-based exchange in a speech in September, he said he wanted to create a “primary” funding platform for “service-oriented” small businesses. ”And“ innovative ”.

Small and medium-sized enterprises traditionally have difficulty obtaining funds from the Chinese public banking system due to their lack of collateral and other constraints.

But if China is to realize Xi’s ambition to surpass the West in advanced technologies, these companies will have to develop and innovate.

In 2018, as the trade war between the United States and China raged, Xi unveiled a board of directors for startups on the Shanghai Stock Exchange – the Star Market – which focuses on companies with “technology. core in key areas’, such as high-end semiconductors. and computer processors. There is also a Nasdaq-style council on the Shenzhen Stock Exchange, the ChiNext, which was established in 2009 to target high-growth startups.

The Beijing Stock Exchange will “complement” the Shanghai and Shenzhen stock exchanges and focus on serving innovative small businesses, the China Securities Regulatory Commission said in September. At present, BSE-listed companies have an average market value of around 3.9 billion yuan ($ 610 million).

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Increase Beijing’s influence

Mainland China’s main stock exchanges are located far from the country’s political center in the north. The Shanghai Stock Exchange, established in the eastern city in 1990, mainly hosts large-cap companies, including state-owned enterprises, banks, and energy companies. The Shenzhen Stock Exchange in southern China has a larger proportion of tech companies.

(Hong Kong, the former British colony in southern China, also has an international stock exchange that is subject to different regulatory and legal systems. It is exempt from the kind of strict capital controls that Beijing imposes on the mainland.)

“The establishment of BSE is conducive to balanced regional development and will increase the influence of northern China [on the] capital market, ”said Luo Zhiheng, chief macro analyst for Guangzhou-based Yuekai Securities, in a recent research report.

In addition, the Beijing Stock Exchange can “better serve the central positioning of the capital which is to become the national center of politics, culture, international trade, technology and innovation”, a goal set by Xi in 2014, Luo said.

Door closes on Chinese tech IPOs on Wall Street

The launch of the Beijing-based exchange also comes as the door closes for overseas Chinese tech IPOs, due to tighter control of such companies in China and the United States.

Beijing has encouraged its businesses to register domestically and become less reliant on foreign money and technology, a campaign that escalated during the 2018-19 trade war with the United States.
He also appears keen to prevent the huge amount of sensitive data held by tech companies from falling into the hands of foreign governments – which manifested itself in his surprising decision in July to suspend Didi days after the introduction in US ridesharing giant stock market, citing data collection breaches.

China’s Cyberspace Administration on Sunday proposed stricter rules for tech companies providing overseas listings. Businesses wishing to register in Hong Kong must undergo cybersecurity inspections if they hold national security data, the regulator said.

Businesses with more than one million users must also apply for cybersecurity approval before registering abroad, he added, reiterating a July directive.

“Chinese executives are increasingly wary of listing their companies in the United States … especially for companies that control large amounts of data,” analysts at New York-based Eurasia Group said in a recent report. of research.

“Indeed, the recently announced Beijing Stock Exchange is intended to help small Chinese companies raise capital outside the United States,” they said.

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