Apr 28, 2020 05:10 AM

ChiNext Launches Registration-Based IPO System

ChiNext follows STAR Market in adopting registration-based IPOs. Photo: VCG
ChiNext follows STAR Market in adopting registration-based IPOs. Photo: VCG

China’s Nasdaq-style ChiNext board is officially launching a widely expected trial of a registration-based initial public offering (IPO) system and allowing money-losing startups to list on the board.

The China Securities Regulatory Commission (CSRC) and the Shenzhen Stock Exchange issued supporting rules Monday related to ChiNext’s move to a registration-based IPO mechanism and started soliciting public opinions on the rules.

A registration-based IPO mechanism is more market-oriented than the approval-based system, under which the CSRC vets every application, and approvals can take months or even years. Currently registration-based IPOs are allowed only on the Shanghai Stock Exchange’s high-tech STAR Market, a competitor to Shenzhen’s ChiNext.

ChiNext’s registration-based IPO system will largely be same as the STAR Market system, CSRC Vice Chairman Li Chao said Monday at a media briefing. The registration process consists of two parts: review by the exchange and registration with the CSRC, which decides whether to approve the registration within 20 business days, Li said.

The new rules remove a current requirement that potential listing candidates must have no loss in the latest period and allow a one-year transitional period for money-losing companies. The loosened requirements take into account factors such as expected market value, revenue and profit, Li said.

Meanwhile, the new rules raise the bar for profit-making companies, requiring earnings of no less than 50 million yuan ($7.06 million) in the last two years or expected market value of no less than 1 billion yuan, profitability in the latest year and revenue of at least 100 million yuan.

For those companies registered as wholly foreign-owned enterprises in China, the bar is even higher. Many larger Chinese enterprises are often incorporated overseas in places such as the Cayman Islands and operate in China through local subsidiaries to bypass China’s securities requirements and gain access to foreign capital markets.

ChiNext supports listings of such companies with special equity structures, but their market value must be at least 10 billion yuan or their profits must be at least 500 million yuan in the latest year, according to an official at the Shenzhen Stock Exchange.

Currently, ChiNext doesn’t set a capital threshold for investors, only requiring them to have at least two years of trading experience. The new rules add a minimum requirement of 100,000 yuan of daily average capital for the first 20 trading days.

Contact reporter Denise Jia ( and editor Bob Simison (

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