China is adding another bourse to its already 2, the latest being in Beijing catering primarily for the small and medium-sized enterprises (SMEs) as the capital market evolves to meet the growing demands and potential of this sector.
Compared to the stock exchanges of Shanghai and Shenzhen, the new Beijing bourse has the clear mission of serving this segment as China’s economic resilience hinges heavily on these enterprises.
Based on World Bank in 2018, China’s SMEs and micro firms had a finance gap of USD1.89 trillion accounting for 17 percent of the country’s GDP. Besides encouraging banks to lend more to the SMEs, Chinese policymakers have been taking steps to reform the capital market to enable direct financing of the firms to fix the structural imbalance.
Built upon the New Third Board which was previously the platform hosting these SME’s to raise capital, the Beijing bourse will play similar role with added leverage, including no limits on the price change on the first day of trading.
The move offers an important venue for SME financing, lowers the threshold for growth companies to obtain financing through formal institutions, and will help foster a multi-level capital market, said Zou Yasheng, head of the School of Banking and Finance with the University of International Business and Economics.
Mattias Debroyer, economic and commercial consul with the Brussels Agency for Business Support, hailed the move to shore up support for innovative SMEs and called on more synergies between Beijing and Brussels.