The cabinet is likely to endorse the finalised rules on the Nasdaq-style market in the coming weeks, paving the way for the much-anticipated launch of the second board.
The China Securities Regulatory Commission filed the rules with the State Council recently and approval was expected before the National People's Congress early next month, sources said.
Once the green light is given, the CSRC could start reviewing listing applications. It will set up an independent listing review committee, according to the finalised rules. Start-ups have been awaiting the technology-laden market for nine years, since Beijing started to prepare the second board on the Shenzhen Stock Exchange in 2000.
The CSRC had planned to launch the second board in June last year to create a new financing channel for small companies, but the market's freefall prompted state leaders to halt the plans amid worries that a flood of new listings would exacerbate the problem.
'The second board will more or less drain liquidity out of the existing shares,' said Dazhong Insurance fund manager Wu Kan. 'It's not good news to the market.'
The Shanghai Composite Index dived 65.39 per cent last year, the biggest drop in its 18-year history.
