China Mints Latest Stock Exchange

The opening of the Beijing Stock Exchange is a positive signal of the government’s intention to open its financial market to global investors.

Trading on China’s newest bourse, the Beijing Stock Exchange, began on Nov. 15, 2021. The latest exchange is the nation’s third center for trading, after the Shanghai and Shenzhen stock markets. The exchange’s backers incorporated Beijing’s existing over-the-counter New Third Board market in building the Beijing Stock Exchange.

The new exchange looks to build a multilayered capital market to enhance financing systems for small and midsize enterprises (SMEs) with high growth potential, in line with President Xi Jinping’s “common prosperity” policy of reducing wealth gaps across the country.

The Beijing Stock Exchange traded 81 stocks on its first trading day, including ten preapproved, newly listed stocks and 71 existing listings transferred from the New Third Board. The stock prices of the 10 freshly listed companies surged in their initial trading day and triggered temporary trading halts, while the other 71 stocks delivered a mixed performance.

The Beijing Stock Exchange employs the same registration-based IPO mechanism as its sibling exchanges, Shenzhen’s ChiNext and Shanghai’s STAR Market. Thus, it paves the way for Beijing Stock Exchange–listed companies to migrate to ChiNext or Star Market once they meet the other exchange’s listing standards. ChiNext and STAR Market, which opened for trading in 2009 and 2019, respectively, aim to attract innovative fast-growing companies. The overlap between the new bourse and the other two exchanges is minuscule, as the three target companies of different sizes and in different industry segments. The requirements for investors in the Beijing exchange are the same as those of the STAR Market.

Despite China’s aggressive tightening of regulatory and enforcement restrictions in its domestic financial markets—primarily targeting giant Chinese companies and companies that seek overseas listings—the opening of the Beijing Stock Exchange is a positive signal of the government’s intention to open its financial market to global investors. Moreover, the Beijing Stock Exchange’s adoption of a registration-based IPO mechanism enables SMEs to access capital directly from other domestic financial centers. It indicates that the nation has entered a new phase of comprehensive financing structures, the foundation of a financial regulatory system with higher standards.