New stock exchange set to benefit small firms

China's new stock exchange in Beijing will likely prove a boon for facilitating the financing of small and medium-sized businesses, boosting innovation-driven economic development and perfecting the country's capital market system, officials and experts said on Friday.

They commented after President Xi Jinping announced on Thursday that China will set up a stock exchange in Beijing and build it into a major base for serving innovative small and medium-sized enterprises.

The NEEQ Select, the highest tier of the National Equities Exchange and Quotations system, will be upgraded into the Beijing stock exchange, bringing the total number of national stock exchanges to three in the Chinese mainland, including those already operating in Shanghai and Shenzhen.

The NEEQ system, which debuted in 2013 and is also known as the "new third board", is an equity trading system for SMEs.

Zhou Guihua, director of the public company department with the China Securities Regulatory Commission, said the Beijing stock exchange will be tailor-made for serving innovative SMEs at an earlier development stage than those listed in Shanghai and Shenzhen.

Differentiated rules and arrangements will be made to ensure that the three stock exchanges complement each other with different focuses, Zhou said at a news conference on Friday.

Listed companies on the Beijing stock exchange which have matured will be allowed to transfer their listing venue to Shenzhen and Shanghai for further development, helping to perfect a multilayered capital market system catering to the financing needs of companies at different stages of development, he said.

According to the CSRC, the Beijing stock exchange will pilot the registration-based public offering system, and its listing requirements will remain the same as those of the NEEQ Select.

All of the companies now traded on the NEEQ Select will go public on the new exchange. Additional companies to be listed on the exchange will come from qualified firms traded on NEEQ Innovation, the NEEQ's second-highest tier, the commission said.

Chris Liu, a senior portfolio manager with global asset manager Invesco, said the new stock exchange will help support the development of SMEs by alleviating their financing difficulties, which has been the key challenge for them.

"Supporting SMEs with more direct financing channels could help boost consumption in China as SMEs employ the majority of the country's workforce," Liu said.

Chen Jiahe, chief investment officer at Novem Arcae Technologies, a Beijing-based wealth management firm, said the exchange would help to increase creativity in the Chinese economy and facilitate financing for companies in northern China, given Beijing's geographical location.

Nevertheless, experts also called for maintaining a rational approach toward the new exchange's development prospects and functions in terms of boosting the economy, given that financing woes are only one of the multiple challenges facing SMEs.

China's A-share market ended lower on Friday, with the benchmark Shanghai Composite Index edging down by 0.43 percent to close at 3581.73 points. Shares of investment banks and venture capital funds, which are seen as beneficiaries of the new exchange, jumped in morning trading but lost some gains later.

Shi Jing contributed to this story.