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BEIJING: Trading began on Monday in a Chinese stock market for high-tech companies that play a key role in official development plans that undermine relations with Washington.
The regulators have approved 25 companies in information technology and other areas considered by leaders as a means of prosperity and global influence for the STAR market of the Shanghai Stock Exchange.
The market, inspired by NASDAQ based in the United States, reflects the willingness of the ruling Communist party to channel private capital into its development plans. This gives small Chinese investors the opportunity to make purchases in technology industries that, up to now, have turned to Wall Street to sell their shares.
The STAR market has no direct link to the tariff war between Beijing and Donald Trump following the US's claims against China. But this will raise funds for industries that some US officials see as a competitive threat to US technology leadership.
"The new role of the new board is to provide a fundraising channel for China's scientific and technological innovation," said economist Lu Zhengwei at the Shanghai Industrial Bank.
The Chinese stock exchanges in Shanghai and the southern city of Shenzhen were created in the early 1990s to raise funds for the state-owned industry. They have been expanded to include private companies, but are still dominated by government-owned companies, such as PetroChina Ltd. and China Mobile Ltd.
Companies such as e-commerce giants Alibaba and JD.com and search operator Baidu.com have collected billions of dollars on Wall Street. However, foreign share sales are impractical and costly for small businesses.
The STAR market has lower standards of profitability and price volatility than the major stock markets. The Shenzhen Stock Exchange launched in 2009 its second board of directors, called ChiNext, for small, fast-growing companies. Companies that have not yet made a profit can trade on the technical chart of Shanghai if they spend at least 15% of their revenue on research and development or have drugs or other technologies in development advanced.
On the other hand, the lead counsel needs at least two years of benefits before being able to join a company, a condition that has limited access to start-ups.
Allowing companies to sell stocks before they become profitable will encourage the development of Chinese venture capital by allowing early investors to recover some of their money, said Lu, of Industrial Bank.
The stock price on the new market may fluctuate by 30% before regulators impose a 10 minute halt in trading. The main exchanges stop trading on the day of any price increase or decrease of 10%.
In addition to companies that began trading on Monday, the Shanghai Stock Exchange announced that it was reviewing applications from 116 other companies for an initial public offering of shares.
A state-owned railway order manufacturer accounts for most of the value of the shares in the market. China Railway Signal & Communication Co., Ltd. said it raised 10.5 billion yuan (1.5 billion) of investors.
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