China start-ups hopeful as authorities ready Nasdaq-style tech board

China’s ambitions for a Nasdaq-style board for start-ups have galvanised the country’s tech companies who are hopeful they can sidestep complex initial public offering (IPO) hurdles and access easier funding.

The surprise announcement for Shanghai’s planned “technology innovation board” by President Xi Jinping in early November paves the way for a lower listing threshold, potentially scrapping a requirement that aspiring companies must be profitable.

For Beijing, the move is seen helping to counter US curbs on its technology companies and may draw the next generation of hi-tech firms to list at home. Some of China’s best known brands such as e-commerce firm Alibaba Group Holding and gaming and social media giant Tencent Holdings have listed in New York and Hong Kong.

Last year, Chinese companies raised US$64.2 billion globally – almost a third of the worldwide total – via initial public offerings (IPOs), but just US$19.7 billion of that came from listings in Shanghai or Shenzhen, according to data from Refinitiv, compared with US$35 billion in Hong Kong.

The intense interest in the new board, even before rules are finalised, underscores the significance to private Chinese companies of having an alternative source of funding.

“Our business is in the field of network information security and coding technology, and we’re regulated by the (Communist) Party. So we cannot receive foreign capital or list overseas,” said Tan Jianfeng, Chairman of PeopleNet.