Shanghai maps out course to raise listed companies’ quality in a bid to burnish financial hub credentials

Shanghai will encourage local companies in fledging industries to list on the stock market, promote market-based mergers and acquisitions and streamline delisting mechanism, as China’s biggest commercial city seeks to improve the quality of publicly traded companies.

Makers of integrated circuit, new-energy vehicles and high-end equipment as well as companies from the city that represent the new economy will be given priority for going public, according to a 17-point guideline promulgated on Friday by the Shanghai government, which takes effect next month.

Technology firms in Zhangjiang hi-tech park and Lingang industrial zone, where Tesla’s plant is based, will be encouraged to list on Shanghai’s Nasdaq-styled Star Market, it said.

The government will also encourage the listings of so-called red-chip companies – Chinese firms that are incorporated overseas – on the Shanghai market. The same treatment will be applied to companies with mixed-ownership, which includes both state and private investors.

The guideline is seen as part of a drive to build Shanghai into a global financial centre. The city has set up free-trade zones to facilitate foreign trade and capital flows, and launched the Star Market to woo China’s fastest-growing companies in direct competition with Hong Kong.

“Listed companies are the cornerstone of a healthy and stable development of the capital market, and have an obvious effect in promoting regional economic growth,” said the guideline.

Currently, 337 companies from Shanghai are listed on the mainland’s two exchanges, with a combined market cap of 7 trillion yuan (US$1.1 trillion). That ranks Shanghai in third place among China’s provinces and municipalities in terms of the values of the listed companies.

A gauge of listed companies based in Shanghai has risen 9.4 per cent this year, underperforming an 11 per cent gain on the benchmark Shanghai Composite Index, according to data provider Shanghai DZH.

Shanghai-based publicly traded companies will be allowed to undertake asset revamp, acquisitions and spin-off listings as part of the industry upgrade, according to the guideline. The local authorities will also seek to defuse the risk linked to listed companies’ pledged shares and ramp up efforts to penalise wrongdoing, such as accounting fraud and insider trading, an unauthorised use of funds of listed units.

These developments come after a senior official from the China Securities Regulatory Commission on Thursday called for improving the quality of the nation’s listed companies at a forum.

A market-based registration system will be extended to all initial public offerings in the future and delistings will be decided on a combination of financial indicators instead of only annual losses, according to Sun Nianrui, a vice-director at the stock-market regulator.