Across The BorderReform delays make mainland China’s ‘new third board’ a magnet for small companies seeking cash

The “new third board”, the mainland’s biggest over-the-counter (OTC) equity market, has become a magnet for cash-hungry small companies now the securities regulator has shelved plans to create a new board for emerging industries and also delayed the implementation of a registration-based system for new share offerings.

The electronic equity transfer system has long been touted as an important part of mainland China’s multi-layer capital market, designed to help start-ups raise funds in line with Beijing’s determination to bolster technological development.

Its profile was raised recently after the China Securities Regulatory Commission (CSRC) unexpectedly abandoned plans to create a new board at the Shanghai Stock Exchange which would have been home to high-growth firms in the fields of information technology, new energy and biotechnology.

The securities regulator has also put on hold a plan to ease the review process for initial public offerings (IPOs), making it difficult for hundreds of listing applicants to tap stock market funds any time soon.

Beijing approved the launch of the board for emerging industries late last year, with market watchers predicting the first batch of companies would receive the go-ahead to list in the first half of this year.

The CSRC made an about-turn in March when it deleted the plan for the new board from the government’s five-year blueprint for 2016-2020 after Liu Shiyu, a former deputy governor of the central bank and chairman of Agricultural Bank of China, replaced Xiao Gang as commission chairman.

At the end of 2015, the nation’s top legislature cleared the way for the CSRC to embark on a new IPO system by allowing it to relinquish responsibility for reviewing listing documents.