STAR Market reforms to spur innovation

Ongoing reforms at the tech-focused STAR Market of the Shanghai Stock Exchange, part of China's continued efforts to give more financial support to the private economy, will further spur technology innovation and facilitate high-quality economic growth in the country, said experts.

The comments came after two new private economy-focused subindexes were officially launched at the STAR Market on Wednesday.

The SSE STAR Private-owned Enterprises Index will track all private companies trading on the STAR Market.

Public data show that there were 422 such companies by the end of June, with a combined market capitalization of 3.5 trillion yuan ($490 million). Among these, 171 reported increases both in sales revenue and net profit last year, 37 companies posted a 50 percent year-on-year increase in turnover, while 64 firms saw a 50 percent surge in annual net profit.

Another subindex, SSE STAR Private-owned Enterprises 50 Strategy Index, was also launched on Wednesday.

The index constituents are 50 private companies with high research expenditure and strong profitability. Companies specializing in semiconductors, computers and biomedicine account for about 68.5 percent weighting in the new index.

The total market cap of its 50 constituents reached 1.2 trillion yuan by the end of June. The average daily trading value of these companies came in at 16.1 billion yuan in 2024.

Fang Yi, chief strategist at Guotai Haitong Securities, said that index-based investments have been maturing at the STAR Market after the board started trading six years ago. More products have been designed and introduced based on these indexes, boosting market activity and diversifying the investor pool, he said.

A total of 32 STAR Market subindexes have been launched so far, deriving 86 STAR Market exchange-traded funds with a total market value of over 250 billion yuan. Half of these subindexes were rolled out after the release of eight additional reform policies for the STAR Market in June last year, according to SSE and China Securities Index Co Ltd.

According to market tracker Wind Info, there are about 3,478 private companies trading on mainland's major exchanges, accounting for two-thirds of all the A-share companies. Their combined market cap topped 31.7 trillion yuan, accounting for 38.5 percent of the A-share market total.

More important, A-share listed private companies saw their combined research investment exceeding 650 billion yuan for a second consecutive year in 2024. Research expenditure was equal to 3.8 percent of their annual sales revenue last year, 1.2 percentage points higher than the A-share market average.

A large number of STAR Market companies specialize in future-oriented industries such as biological manufacturing, quantum technology, embodied intelligence and 6G, which are at an early stage in China, said experts from Changjiang Securities.

Focusing on hard technologies, cutting-edge technologies and market-based pricing, the STAR Market has served as a major venue for the Chinese capital market to facilitate technology innovation, said Tian Xuan, head of Tsinghua University's National Institute of Financial Research.

China has also been advancing efforts to inject more vitality into the private sector. The Private Sector Promotion Law, which took effect in May, has unveiled substantial measures regarding the investment and financing of private enterprises.

Apart from announcing a set of new STAR Market reform policies at the Lujiazui Forum in June, China Securities Regulatory Commission Chairman Wu Qing stressed that unprofitable yet quality innovation-driven companies will be supported to seek public listings.

With concerted efforts from various government bodies, financing provided to private enterprises will be increased and their costs lowered. These companies' technology innovation and green transition will be better supported, said Tian Lihui, head of the Institute of Finance and Development at Nankai University.