Opinion: Shanghai's sci-tech trading board to give new energy to China's economy

The launch of the Science and Technology Innovation Board (STIB) on the Shanghai Stock Exchange will facilitate the country's high-quality development using the power of innovation, according to an opinion piece published by Commentaries on International Affairs on Friday.

Honored guests preside over the launching ceremony of the sci-tech innovation board of the Shanghai Stock Exchange at the Lujiazui Forum in Shanghai, June 13, 2019. [Photo: IC]

The STIB was inaugurated on Thursday in Shanghai, six months after China's President Xi Jinping announced the plan to launch the new board on the Shanghai exchange. The launch demonstrated China's determination to act fast in carrying out capital market reforms, said the commentary.

As the home of the world's second-largest economy, China is moving towards a period of high-quality development driven mainly by innovation. The STIB board will accelerate China's science and technology innovation by providing direct financial support to the country's tech companies.

The registration-based IPO system has been widely adopted at stock markets in developed economies, including the New York and London exchanges. Under the board's operating mechanisms, tech companies don't have to wait for an extended period to launch an IPO. Instead, the process will be led by the capital market, which means that strong tech companies could quickly gain investors. The new board will also provide middle and small-sized enterprises with more opportunities to access financing.

The rise of China's science and technology industries relies on the support of capital markets. China has handled 122 applications for IPOs on the STIB in sectors including next-generation information technology, advanced equipment, new materials, new energy, and biomedicine.

The commentary pointed out that the STIB board will give international investors opportunities to win dividends as a result of China's development. China currently has 3,639 listed companies, with a combined value of more than 52 trillion yuan. In 2018, foreign investors purchased a total of 42.5 billion U.S. dollars of domestic listed stocks, an annual increase of 85 percent. Yet foreign capital only accounts for 2 to 3 percent of the total capital in China's stock markets. The STIB board is expected to attract more foreign investors to China, which will benefit companies and investors both at home and abroad.