China is in the midst of launching a stock exchange in Beijing, according to a statement made by the country's President Xi Jinping earlier this month. Given that the Asian country already has three stock exchanges (two continental, in Shanghai and Shenzhen, and another in Hong Kong), the logical question would be for what purposes a new exchange is being sought.
Existing platforms
The Shanghai Stock Exchange is the largest and oldest in China and serves as a platform mainly for large state-owned companies. Smaller companies are listed on the Shenzhen Stock Exchange. The Hong Kong Stock Exchange, although it has a variety of Chinese companies registered, is subject to different regulations and legislation since it is an area that enjoys some autonomy from the mainland.
In 2013, the government launched an over-the-counter system in Beijing for the sale of shares of small and medium-sized companies not registered in Shanghai or Shenzhen. It is precisely this platform that will serve as the basis for the new exchange.
"Long-term development"
The goal officially announced by President Xi is to support the growth of "innovation-oriented" small and medium-sized enterprises, which will be able to attract investment by putting their shares on the market.
"This is a clear example of Beijing's intention for markets to serve the real economy and specifically its long-term development goals," Rory Green, head of China research at TS Lombard, told The Financial Times.
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