China’s new small-cap stockmarket

China has announced plans to establish a new stock exchange in Beijing that will be aimed at small and medium-sized firms. Mainland China already has two exchanges, says Laura He on CNN. The Shanghai Stock Exchange, founded in 1990, “hosts mostly large-cap companies, including state-owned enterprises, banks and energy firms”. Another exchange, in the southern city of Shenzhen, is more tilted towards tech companies. There is also an exchange in Hong Kong, but it is governed by a separate regulatory system.

Many Chinese firms, such as Alibaba, have previously opted to list in the US. But they now face pressure from both China, which would prefer domestic companies list at home, and US regulators, who are tightening disclosure rules to protect investors.

The new trading venue may be intended to signal that the recent crackdown on tech and education firms isn’t aimed at all entrepreneurs, says Jacky Wong in The Wall Street Journal. But a new market is unlikely to “move the needle much”. Smaller firms already have options to access domestic funding through Shenzhen’s ChiNext subsidiary and Shanghai’s Star Market, which was launched in 2019 to rival America’s Nasdaq. “What is really needed is a stronger commitment to corporate transparency” and rules that make it easier for firms to list in the markets that China already has.

MoneyWeek

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Alex is an investment writer who has been contributing to MoneyWeek since 2015. He has been the magazine’s markets editor since 2019.

Alex has a passion for demystifying the often arcane world of finance for a general readership. While financial media tends to focus compulsively on the latest trend, the best opportunities can lie forgotten elsewhere.

He is especially interested in European equities – where his fluent French helps him to cover the continent’s largest bourse – and emerging markets, where his experience living in Beijing, and conversational Chinese, prove useful.

Hailing from Leeds, he studied Philosophy, Politics and Economics at the University of Oxford. He also holds a Master of Public Health from the University of Manchester.