What is China’s New Tech Board? China launched a third board — National Equities Exchange and Quotations (NEEQ) — on the Beijing Stock Exchange back in 2006 in a bid to create a means for small tech startups to raise capital. But, after an initial rush of investment that prompted a boom and bust cycle, the third board has remained relatively lifeless. Now, Beijing hopes to create a new, more sustainable channel for tech startups to raise funding through a Nasdaq-like tech board, called the Sci-Tech Innovation Board, on the Shanghai Stock Exchange. The new tech board is an addition to the already multi-tiered Shanghai Stock Exchange: The Exchange consists of the Main Board, the Small and Medium Enterprise (SME) Board and the Growth Enterprise Board. The Main Board is designed for large-scale companies that plan to raise large amounts of funds. The SME Board targets companies with a smaller scale for funds. The Growth Enterprise Board is suitable for small-scale and high-growth entrepreneurial enterprises. In this context, board means a platform within the stock exchange for certain type of companies to raise funds. The tech board will use a Western-style registration-based initial public offering (IPO) system with listing process that is much simpler than for listings on the main board. With the new tech board, the vetting process for listing will be simplified and companies will face less red tape, speeding up the application process. Exchange officials say they will limit the review period for IPO applications at the new tech board to three months. Under the current system, companies have to secure approval from the China Securities Regulatory Commission — a lengthy process, and the regulator imposes a cap on valuations. What Is China’s Blueprint for the Tech Board? The China Securities Regulatory Commission said the new tech board will focus on listing companies that:

• Possess critical technology and breakthrough achievements in line with the country’s national development strategy.
• Are active in high-tech industries and strategic emerging industries such as information technology, high-end equipment, new materials, new energy, eco-friendly technology and biomedicine.
• Have a focus on integrating Internet, cloud computing, big data, artificial intelligence and high-end manufacturing.

China is attempting to attract domestic tech startups to list at home as competition heats up from other exchanges including the Stock Exchange of Hong Kong and the Nasdaq. Many Chinese technology companies listed in the US or Hong Kong, such as Xiaomi, JD.com, and Alibaba, as listing requirements were easier to meet in those markets. One of the biggest challenges for technology companies wanting to list in China are profit requirements that small startups may not be able to meet: The company must have made a profit over the last three consecutive years upon filing for an IPO. The new tech board will allow start-ups that have yet to turn a profit to be listed. Implications Around 100 firms, from state-owned China Railway Signal & Communication to cloud storage provider UCloud Technology, have already applied to list on the new board. Investment banking firm China International Capital Corporation estimates nearly 150 companies will list on the new board in 2019 and will raise a total of ¥50-100 billion ($7.45-14.9 billion) of funds. China’s new tech board with its relaxed IPO rules will likely draw more domestic tech startups to go public at home. The move is part of China’s effort to develop its tech sector and boost economic growth in general.