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Frequently asked questions about ChiNext

(China Daily/Agencies)
Updated: 2009-10-29 08:17

What is ChiNext?

Chinese mainland's first enterprise board, it will complement its two main stock exchanges in Shanghai and Shenzhen by targeting fast-growth start-up companies. The board, based in Shenzhen, is an important component in the multi-tier capital market system, which also includes a small and medium-sized enterprise (SME) board.

How does ChiNext differ from the main boards?

It has a lower listing threshold, offers riskier but potentially more profitable investment opportunities, and imposes more stringent rules on trading, information disclosure and delisting.

Why is ChiNext being launched?

China wants funds to be channelled through to private SMEs that have largely been excluded from the existing exchanges, which are dominated by former State-run enterprises. SMEs find it tough to get bank loans but are crucial to driving innovation and creating jobs at a time when China is keen to sustain growth and reduce the economy's reliance on manufacturing.

The move, a milestone in the nation's capital market reform, is also aimed at widening investment channels, stimulating public enthusiasm for entrepreneurship and boosting domestic venture capital and private equity investment.

What type of company can be listed on ChiNext?

Applicants must show a profit for the previous two years, with an accumulated profit of no less than 10 million yuan ($1.4 million) and growing. Otherwise, the issuer must have been profitable for 12 months, have a net profit of over 5 million yuan and revenue of more than 50 million yuan, and experienced revenue growth of more than 30 percent in either of the two previous years.

All issuers must have net assets of at least 20 million yuan at the end of the previous accounting period, with no uncovered losses, and total post-initial public offering share capital of at least 30 million yuan.

Do other countries have similar boards?

There were 47 second board markets worldwide at the end of last year, say Bohai Securities. Successful ones include the Nasdaq in the United States, Britain's AIM and South Korea's Kosdaq. Others, such as Hong Kong's Growth Enterprise Market and Japan's Jasdaq, have struggled with waning investor enthusiasm.