(Chinese Version)

Editor's Note:

According to Caixin.com, the long-expected Strategic Emerging Industry Market might not happen after all. Rumor has it that there have been 57 changes in the 13th Five-Year plan, one of which is the removal of the plan to establish the Strategic Emerging Industry Market. An authoritative source has stated that means the Strategic Emerging Industry Market is not to happen after all.

On December 25th last year, Fang Xinghai, vice president of CSRC, pointed out on the press conference at the State Council’s conference room that the launch of the Strategic Emerging Industry Market would be combined with the establishment of register system. Fang Xinghai stated that the planning of specific details of the Strategic Emerging Industry Market was in process.

Reported by Caixin.com, on March 12th, Liu Shiyu, president of CSRC revealed on the press conference that the register system so far was not mature enough. Liu reiterated the fact that the development of the capital market must be based on legalization and marketization during the two sessions news conference.

Xiao Gang: Develop alongside the GEM and launch the Strategic Emerging Industry Market

The Strategic Emerging Industry Market was a policy proposed on the Suggestions On Driving The Mass Innovation And Mass Entrepreneurship Policy Forward. The policy was supposed to further boost the development of Shanghai Stock Exchange.

Compared with the newly launched GEM, which focuses more on startups especially small and medium-sized startups, the Strategic Emerging Industry Market is a supplement to the GEM and it aims to serve as a stimulus in supporting newly emerged industries in the capital market.

Shanghai Stock Exchange’s first economist Hu Ruyin stated that there are two incentives for the government to launch the Strategic Emerging Industry Market: One is that there are lot of companies related to big data, the country’s economy, cyber security, and cultural security etc. are panning to go public overseas; the Strategic Emerging Industry Market is a channel for companies that have been listed in overseas markets to return to China.

On June 26th last year, CSRC’s committee president Xiao Gang announced on the Lujiazui Forum that the Shanghai Stock Exchange would establish the Strategic Emerging Industry Market and develop alongside the GEM. On 27th, Shanghai’s municipal government Jin Xingming further revealed that the establishment of the Strategic Emerging Industry Market in Shanghai Stock Exchange had been approved by the state council.

Even on January 16th 2016, before Xiao Gang left his position, he still emphasized that the reform of the register system would be the priority for the CSRC in 2016. He also stated that the Strategic Emerging Industry Market would be launched in 2016 so as to test the waters.

On February 20th, Xinhua News Agency reported that the central government had relieved Xiao Gang from his duty as the secretary of the party committee at the CSRC and had appointed Liu Shiyu as the new secretary. Besides that, Xiao Gang also lost his title as the president at the CSRC. And the Strategic Emerging Industry Market was proposed by Xiao Gang originally.

Although Xiao Gang’s initiatives had been quite a controversy, we can’t deny the fact that in the past three years the venture capital market in China had been developing at the fastest speed in history. The new three board, the Strategic Emerging Industry Market, and register system etc. are all major progressive reforms and initiatives. One writer on TMTpost even predicted that in the future people would miss Xiao Gang.

The awkward situation for listed companies to come back to China

The loss of the Strategic Emerging Industry Market is definitely a bad news for many companies that are waiting for getting listed. Before that, many Chinese companies listed in overseas markets are planning to go back to Chinese markets, and for that they have made quite a few purchases to become private again. Meanwhile, they are working actively to get rid of the VIE structure to meet the requirement of going public in China.

With that came a return wave of Chinese companies in 2015. According to Securities Times, by December last year, there had been about 30 companies that had started their plan of returning to Chinese markets. However, at present these companies are in an awkward situation getting stuck in the middle of getting rid of their VIE structure.

Even so, there are also supporters that are in favor of not having a Strategic Emerging Industry Market. According to Sina Financial reports, Securities Daily’s vice editor-in-chief Dong Shaopeng recently commented on his WeChat Moment that he agreed with the elimination of the establishment of the Strategic Emerging Industry Market.

In his opinion, the main board must grow stronger as a whole while the second board strives to improve competitiveness and the third board continues to mature. He believes that this would be the fundamental structure of the Chinese stock market. In current stage, it’s necessary to merge small and medium-sized enterprises board with GEM so as to form a second board market with depth. In this case, it’s right to eliminate the Strategic Emerging Industry Market that doesn’t fit into any category. Whether it’s the main board, second board or the third board, they are not some local government’s market, but the whole nation’s. Therefore, initiatives have to be made to make the stock markets public service platforms instead of platforms for local powers to compete over interest.

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Translated by Garrett Lee (Senior Translator at PAGE TO PAGE), working for TMTpost.