China To Reform Shanghai's Nasdaq-Style Star Market To Align More With Xi Jinping's 'New Productive Force' Initiative: Securities Watchdog

In a bid to bolster the appeal of Shanghai’s Nasdaq-style tech board, the Star Market, China has introduced a series of reforms. These measures are aimed at improving the quality of listed companies and promoting technological innovation.

What Happened: The China Securities Regulatory Commission (CSRC) unveiled eight measures to revamp the Star Market, South China Morning Post reported on Wednesday. The reforms include changes to the primary market pricing mechanism, increased support for mergers and acquisitions among Star Market-listed companies, and optimization of fundraising activities to facilitate research and development.

The CSRC will also encourage the use of stock incentives for employees and introduce more exchange-traded funds (ETFs) and derivative products like index futures and options. These measures are part of the CSRC’s broader strategy to drive tech innovation and enhance the quality of listed companies, aligning with President Xi Jinping’s “new productive force” initiative.

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CSRC Chairman Wu Qing emphasized the importance of these reforms in his keynote speech at the annual Lujiazui forum. He also reiterated the CSRC’s commitment to restoring investor confidence by encouraging listed companies to increase shareholder returns and cracking down on fraudulent listings and accounting falsification.

Why It Matters: The Star Market was launched in 2019 to complement the Shanghai exchange’s main board, and it now hosts 573 companies with a combined market value of 5.2 trillion yuan ($716.7 billion). The board is a crucial component of Beijing’s tech self-sufficiency drive, as China seeks to nurture its home-grown tech giants amid growing tensions with the US.

Despite the reforms, the Star Market 50 index, which tracks the 50 biggest stocks on the board, dropped 0.7% on Wednesday, reflecting ongoing concerns about the economic fundamentals of smaller companies. Wu’s speech at the Lujiazui forum also comes at a time when the rebound in Chinese stocks has slowed, with data for May indicating a patchy economic recovery.

In a separate development, Pan Gongsheng, governor of the Chinese central bank, People's Bank of China, dismissed the idea that its bond trading is a form of massive monetary easing. The PBOC has generally avoided direct trading of government bonds in secondary markets, opting instead for liquidity injections through various lending facilities.

Meanwhile, to further restrict China's access to advanced semiconductor technology, the U.S. is reportedly urging Japan and the Netherlands to tighten their export policies. This move is a continuation of the 2023 agreement between the U.S., Japan, and the Netherlands to prevent China from acquiring advanced chipmaking equipment that could potentially enhance its military capabilities.

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Photo via Shutterstock.

This story was generated using Benzinga Neuro and edited by Pooja Rajkumari