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Restructuring not an option for lossmakers

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The mainland will bar underachieving start-ups traded on the second-board market from restructuring assets to avoid delisting, according to Shenzhen Stock Exchange chairman Chen Dongzheng.

The Shenzhen bourse, home to the country's Nasdaq-style ChiNext market, has drafted two proposals for the delisting mechanism for the start-up board, Chen was quoted by the official China Securities Journal as saying.

The failed small firms on the market would be either directly delisted or demoted to the Securities Trading Automated Quotations Network, an over-the-counter market, he said, stressing that no asset restructurings would be allowed to bail them out.

Chen's remarks reflect increasing efforts to clean up the start-up board after investors who so enthusiastically pushed up prices got a wake-up call when some stocks reported a drop in earnings.

The China Securities Regulatory Commission has rejected 61 initial public offering applications by companies seeking to list on the ChiNext market. The tightened approval procedure resulted from mounting worries on the quality of start-ups listed on the second board.

Thousands of retail investors flocked to the market when it opened in late 2009, but were disappointed when the earnings of about 30 companies fell last year.

Investors had taken it for granted that all of these so-called high-growth companies would report hefty profit growth.

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