Background:

      1.  The original function of establishing the National Equities Exchange and Quotations (NEEQ, known as the New Third Board) in 2013 was to offer SMEs a financing channel with low costs and simple listing procedures.

      2.  The actual outcomes of the NEEQ have not reached expectations.

      3.  Quite a few SMEs are still struggling in financing and finding capitals. 

Current Status and Facts:

     1.  On September 3, Chinese President Xi Jinping announced the establishment of the Beijing Stock Exchange (hereinafter referred to as “BSE”) while addressing the Global Trade in Services Summit of the 2021 China International Fair for Trade in Services

     2.  Quick actions were taken on the BSE following its announcement:

             a)   Several essential operational documents were released on September 5th and 10th to call for comments, covering listing and disclosure requirements, pricing mechanisms, governance structures and so on.

             b)   On September 10, 2021, the official website launched (www.bse.cn).

     3.  China Securities Regulatory Commission (CSRC) stated that:

            a)  The BSE would be built based on the existing NEEQ Select Tier.

            b)  The BSE, Shanghai and Shenzhen stock exchanges (the two main onshore exchanges and regional equity markets) will adhere to coordination and interconnection.

      4.  The exchange will use a registration-based IPO system like those used in developed economies, but when the BSE would begin trading remains unannounced.

Analysis:

      1.  The BSE will replace the current NEEQ Select tier to form the New Third Board along with existing Innovative tier and Basic tier

      2.  Analysts of the sector speculated that the preparation period of the BSE may be shorter than the Shanghai Stock Exchange’s STAR Market in 2019 (Science and Technology Innovation Board).

Possible Impact and Suggestions:

      1.  Foreign investors, who are currently shareholders or intend to buy stocks for the SMEs of the previous NEEQ Select Tier, should keep an eye on the policy and news for any potential implications during the transition period.

      2.  A general stimulation for stocking price of the current NEEQ Select Tier.

      3.  Potential business leaps for SMEs who are fitting in the BSE scope.

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