High-quality development to boost capital market

Shorter process

But under the registration-based IPO mechanism, the listing revision is completed at exchanges. The entire IPO process is significantly shorter, and the resources of shell companies are no longer a factor. As a result, shell companies with poor business performances, higher operating risks and unregulated internal controls will disappear from A-share market, which will improve its quality, he added.

Another major advance is the normalized delisting mechanism, which took effect at the start of 2021.

As of the middle of last month, at least 43 A-share companies had received delisting notices, exceeding the 42 for all of last year and the single-digit figures of earlier years.

Li Zhan, chief economist at China Merchants Fund, said that under the new delisting mechanism, capital market resources are used more efficiently and effectively, as capital once taken up by less competitive companies is now directed to those with true growth potential.

There is also less irrational investment, most of which used to go to less competitive companies, he said. This helps to instill the idea of long-term investment and value investment in the A-share market.

"The delisting mechanism lays the ground for the overall implementation of the registration-based IPO mechanism. These two institutional arrangements are vitally important to improving the quality of A-share companies," Li said.

Zheng Yu, a professional at the International School of Law and Finance at East China University of Political Science and Law, said the registration-based IPO mechanism and the new delisting mechanism are reforms at the entry and exit points of the capital market. Judgments and expectations of price changes in the capital market will change, and it will play a more important role in allocating market resources, he added.

Companies have taken note of the improved environment in the A-share market. Chipmaking giant Huahong Group, which went public in Hong Kong in 2014, saw its listing registration on the STAR Market gain final CSRC approval early last month. Its IPO, aimed at raising 18 billion yuan ($2.5 billion), is expected to be the largest such offering in the A-share market this year.

China Mobile Communications Group, which floated on the Hong Kong bourse in 1997, was listed on the A-share market at the start of last year.

Orient Securities' chief economist Shao Yu said the capital market aims to provide long-term capital to companies in order to support the real economy effectively.

He added that the development of emerging industries, driven by technological advances, has become the engine for high-quality economic growth, which will continue to be the case for many years.

Shao said technologically advanced companies usually require large amounts of preliminary investment, and their investment cycle is longer than that for traditional companies. This equates to higher risks, making it more difficult for technologically advanced businesses to obtain financing from traditional institutions such as banks.

Sharing risks and benefits is a basic feature of the capital market. With its different layers, including venture capital, private equity, primary market and secondary market, Shao said companies in the capital market will acquire financing at different stages of their development to support the market's technological upgrading.

Gui Haoming, chief market expert at Shenwan Hongyuan Securities, said: "We can see that the Chinese capital market has built these different layers. While being different, the STAR Market, ChiNext (also known as the Growth Enterprise Market) and the Beijing Stock Exchange are also connected, enabling market resources to be fully used under such a structure.

"Competitive companies will gain more resources from the market. China's industrial restructuring and upgrading will thus be facilitated, which will serve the nation's goal of realizing high-quality economic growth."

shijing@chinadaily.com.cn