Chinese Government Delays New Shenzhen Board
The Chinese government will delay the launch of a new
Shenzhen-based exchange for small and medium-sized businesses
in Shenzhen, which was expected to launch sometime in
May. The new launch date is unclear, but may be sometime
in October, following the National Day celebrations.
The new exchange, which had been undergoing technical
testing, was awaiting final government approval, and was
due to launch sometime after the Labor Day golden week
in early May. The purpose of the new
Shenzhen exchange was to attract more Chinese businesses
for listings in the Shenzhen market. Following the burst
of the Internet bubble in 2000, there have been virtually
no new listings in Shenzhen.
The main opposition to the new Shenzhen exchange is believed
to come from Hong Kong delegates to the National Peoples'
Congress. Significant numbers of Chinese companies have
listed on the Hong Kong Stock Exchange, and the Hong Kong
shares of their companies are known as H-shares. Newer
companies have listed on the GEM (Growth Enterprise Market)
board in Hong Kong, which is roughly similar to the Nasdaq
market in the US. Their fear is that the new Shenzhen
board will take away their business.
Originally, the new board targeted the same market as
Hong Kong's GEM board, but following complaints from Hong
Kong, it became an SMB board. The Chinese central government
has largely decided to let it function as an SMB board
for two to three years, then after its staff are up to
standards, changing it to a growth board.
Because the Chinese government has still been dealing
with a huge bad loan portfolio, it has pushed back the
implementation of the QDII (Qualified Domestic Institutional
Investor) plan, and has become reliant on the comparatively
healthy Hong Kong markets to maintain market liquidity.
In addition, Hong Kong's economy has benefited from the
Closer Economic Partnership Agreement (CEPA),
which has given preferential treatment to Hong Kong businesses
investing in China.
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