China
China’s new tech board is a rising STAR
Author: Qian Han, Xiamen University
On 13 June 2019, as part of its capital market reform, China officially launched the Science and Technology Innovation Board (STAR). Trading in the STAR market has been quite active since its debut on 22 July 2019. The first batch of 25 stocks listed on the board — mostly from the telecommunication, media and technology sector and equipment manufacturing industries — saw their prices on average more than double with a price-to-earnings (PE) ratio of around 136, compared with the industry average level of just 33. The daily average stock turnover also reached 40 per cent, much higher than that for the Chinese A-share market.
The new board is attracting a lot of investor attention because it is designed to boost the development of China’s sci-tech industry and serve as a test field for future capital market innovations. This dual strategic function is being highlighted amid an ongoing US–China trade war, heightened tensions over Huawei and a recent determination that the Chinese government will gradually open up its domestic financial market to the rest of the world. On 9 August 2019, the 27 STAR-listed companies achieved a total market cap of 660 billion RMB (approximately US$93 billion) and together raised over 37 billion RMB (US$5.2 billion) in net funding from the initial public offering (IPO) after fees and expenses.
The seemingly high PE ratio and turnover could perhaps be explained by the uniqueness of the sci-tech industry. A typical sci-tech start-up company needs years of research and development before it can generate steady income and profits, so investors are encouraged to put more weight on growth potential in valuing STAR stocks instead of the traditional PE valuation model.
On the other hand, statistics from the Shanghai Security Exchange show that on the first day of trading, over 70 per cent of the sell transactions were from institutional investors and over 95 per cent of the buy transactions were from retail investors. This indicates that institutions were eager to pocket early gains, suggesting the possibility of a price reversal in the following trading days. In fact, trading in the third week cooled down — just 3 out of 27 stocks saw their prices rise and on average the market went down by 11.55 per cent.
One of the key innovations of the STAR market is replacing the current approval-based IPO system with a registration-based IPO system. Under this new system, as long as information is guaranteed to be accurate and fully disclosed, the market (rather than the regulatory body) decides whether a firm is capable of issuing stocks and how much a firm is valued.
This holds issuers and investment banks responsible for ensuring the completeness, consistency and validity of the IPO information. On 4 July 2019, the China Securities Regulatory Commission (CSRC) issued a warning letter to China International Capital Corporation, an elite investment bank in China, and put two employees on record for their unauthorised changes of client’s IPO application files.
The STAR board also has the most stringent delisting policies in history. Once a firm meets certain criteria, such as a market cap lower than 300 million RMB (US$41.8 million) for 20 consecutive trading days, it will be immediately delisted. In the main board it is possible for a problem firm to first be suspended, then resume the IPO process after resolving related issues. But firms with severe compliance violations can never be relisted on the STAR board. Regulators hope that these harsh delisting policies will ensure a high quality of listed firms and enhance the efficiency of resource allocation.
STAR market investors also need to get accustomed to a series of new trading rules. Compared with the current 10 per cent price limit for stocks traded on the main board, the STAR market sees no daily price limits imposed in the first five trading days immediately after the IPO, after which it switches to a 20 per cent daily price limit. The wider range of intraday price fluctuations will likely generate higher volatility in the STAR market.
As a countermeasure to curb volatility, the Shanghai Stock Exchange stipulates that when investors place limit orders, the bid price cannot exceed 102 per cent of the base price (usually the best bid) and the ask price cannot be lower than 98 per cent of the base price (usually the best ask). Otherwise these orders are automatically considered invalid. There are also several circuit breakers in place during the trading period to cool down the market.
Further…
China
China Unveils Plan to Upgrade Industrial Equipment
China unveiled a comprehensive action plan for upgrading industrial equipment, with a focus on driving technological innovation and economic growth. The plan, released on April 9, 2024, aims to enhance competitiveness and sustainability within the manufacturing sector through extensive investment and regulatory support.
China announced an ambitious action plan for industrial equipment upgrading, which aims to drive technological innovation and economic growth through extensive investment and regulatory support.
On April 9, 2024, China’s Ministry of Industry and Information Technology (MIIT) and six other departments jointly released a notice introducing the Implementation Plan for Promoting Equipment Renewal in the Industrial Sector (hereafter referred to as the “action plan”).
Finalized earlier on March 23, 2024, this comprehensive action plan addresses critical issues related to technological innovation and economic development. It reflects China’s proactive stance in enhancing competitiveness and sustainability within its manufacturing sector. The initiative underscores the recognition of industrial equipment upgrading as a top policy priority.
The scope of China’s action plan to upgrade industrial equipment in manufacturing, is extensive, covering various aspects such as:
In line with China’s ambitious goals for industrial modernization and sustainable development, the action plan outlines several key objectives aimed at driving substantial advancements in the industrial sector by 2027.
These objectives encompass a wide range of areas, from increasing investment to enhancing digitalization and promoting innovation, including:
The objectives and key actions proposed in the action plan are summarized below.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
China
China deepens engagement with new Indonesian president as top diplomat visits Jakarta
China’s top diplomat met the outgoing Indonesian president and his successor in Jakarta on Thursday, as Beijing deepened its engagement with future leader Prabowo Subianto, amid a competition for regional influence with the United States.
The meeting with Chinese Foreign Minister Wang Yi was part of a joint commitment to advance the partnership between the two countries, said Prabowo, who visited Beijing in early April after his landslide win in the February general election.
“It is a great honor for me to welcome him [Wang] today. Thank you for the kind reception I received in Beijing a few weeks ago,” Prabowo said, according to an Indonesian defense ministry statement.
Chinese President Xi Jinping had invited Prabowo to visit, and the latter accepting the invitation raised eyebrows in Indonesia because no president-elect had made a foreign visit such as this one without being sworn in. China is Indonesia’s largest trading partner.
Wang, too, mentioned Prabowo’s Beijing trip, according to the same statement.
“We really appreciate and welcome Defense Minister Prabowo’s visit to China,” he said.
“We are committed to continuing to increase bilateral cooperation with Indonesia, both in the defense sector and other fields such as economic, social and cultural.”
Wang is scheduled to go to East Nusa Tenggara province on Friday to attend the China-Indonesia High-Level Dialogue Cooperation Mechanism, a process to support more effective bilateral cooperation. His Jakarta stop was the first of a six-day tour that also includes Cambodia and Papua New Guinea.
Prabowo and Wang discussed cooperation in the defense industry and sector, with potential measures such as educational and training collaboration, as well as joint exercises, said Brig. Gen. Edwin Adrian Sumantha, spokesman at the Indonesian defense ministry.
In fact, the ministry statement said that “China is Indonesia’s close partner and has had close bilateral relations, especially in the defense sector, for a long time.”
Of course, China has also invested billions of U.S. dollars in infrastructure projects in Indonesia, including as part of Beijing’s Belt and Road Initiative – the Jakarta-Bandung high-speed train, which began commercial operations in October 2023, is one such BRI project.
The two countries have drawn closer during outgoing President Joko “Jokowi” Widodo’s two terms, and Beijing would like that to continue as the U.S. tries to catch up with China’s gargantuan influence in Southeast Asia, analysts have said.
Indonesia, China call for ceasefire in Gaza
Both Indonesia and China shared the same position on Israel’s devastating attacks on Gaza, said Wang’s Indonesian counterpart, Retno Marsudi.
Israel’s air and ground strikes have killed more than 33,000 Palestinians following the Oct. 7 attack on the Jewish state by Palestinian militant group Hamas, which killed around 1,100 Israelis.
“We … have the same view regarding the importance of a ceasefire in Gaza and resolving the Palestinian problem fairly through two state solutions,” Retno told reporters in a joint press conference after meeting with Wang.
“Indonesia will support full Palestinian membership in the U.N. Middle East stability will not be realized without resolving the Palestinian issue.”
For his part, Wang slammed Washington for repeatedly vetoing resolutions calling for Israel to end the attacks on the Palestinian territory it occupies.
“The conflict in Gaza has lasted for half a year and caused a rare humanitarian tragedy in the 21st century,” Wang told the media at the same press conference, according to the Associated Press.
“The United Nations Security Council responded to the call of the international community and continued to review the resolution draft on the cease-fire in Gaza, but it was repeatedly vetoed by the United States.”
The conflict in the Middle East offered a strategic opportunity for China to further expand its influence in Southeast Asia, said Muhamad Arif, a lecturer in international relations at the University of Indonesia.
“China is trying to strengthen its position as a key player in the region,” Arief told BenarNews.
China could present an alternative approach to the conflict in Gaza, he said, which may find approval in Southeast Asia’s largest country, Indonesia, and other Mulism-majority states in the region, such as Malaysia and Brunei.
BenarNews is an RFA-affiliated online news organization.
Read the rest of this article here >>> China deepens engagement with new Indonesian president as top diplomat visits Jakarta
China
New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
The sixth revision of China’s Company Law is the most extensive amendment in history, impacting foreign invested enterprises with stricter rules on capital injection and corporate governance. Most FIEs must align with the New Company Law by July 1, 2024, with a deadline of December 31, 2024 for adjustments. Contact Dezan Shira & Associates for assistance.
The sixth revision of China’s Company Law represents the most extensive amendment in its history. From stricter capital injection rules to enhanced corporate governance, the changes introduced in the New Company Law have far-reaching implications for businesses, including foreign invested enterprises (FIEs) operating in or entering the China market.
Since January 1, 2020, the Company Law has governed both wholly foreign-owned enterprises (WFOEs) and joint ventures (JVs), following the enactment of the Foreign Investment Law (FIL). Most FIEs must align with the provisions of the New Company Law from July 1, 2024, while those established before January 1, 2020 have bit more time for adjustments due to the five-year grace period provided by the FIL. The final deadline for their alignment is December 31, 2024.
In this publication, we guide foreign investors through the implications of the New Company Law for existing and new FIEs and relevant stakeholders. We begin with an overview of the revision’s background and objectives, followed by a summary of key changes. Our in-depth analysis, from a foreign stakeholder perspective, illuminates the practical implications. Lastly, we explore tax impacts alongside the revisions, demonstrating how the New Company Law may shape future business transactions and arrangements.
If you or your company require assistance with Company Law adjustments in China, please do not hesitate to contact Dezan Shira & Associates. For more information, feel free to reach us via email at china@dezshira.com.
This article is republished from China Briefing. Read the rest of the original article.
China Briefing is written and produced by Dezan Shira & Associates. The practice assists foreign investors into China and has done since 1992 through offices in Beijing, Tianjin, Dalian, Qingdao, Shanghai, Hangzhou, Ningbo, Suzhou, Guangzhou, Dongguan, Zhongshan, Shenzhen, and Hong Kong. Please contact the firm for assistance in China at china@dezshira.com.
- China Unveils Plan to Upgrade Industrial Equipment
- China deepens engagement with new Indonesian president as top diplomat visits Jakarta
- New Publication: A Guide for Foreign Investors on Navigating China’s New Company Law
- Lingang New Area in Shanghai Opens First Cross-Border Data Service Center to Streamline Data Export Process
- A Concise Guide to the Verification Letter of Invitation Requirement in the China Visa Process
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