Update — China’s Version of NASDAQ ?

Author: Lyon Dong (Partner) +86.21.5081.9091 [email protected]

Charles Stone (Int’l Counsel) +86.21.5081.9091 [email protected]

Shanghai Stock Exchange to create Sci-Tech Innovation Board

March 8, 2019

Capital markets; foreign investment

On March 1, 2019, the China Securities Regulatory Commission (CSRC) and Shanghai Stock Exchange (SSE) released the final version of the Sci-Tech Innovation Board Rules (STI Board Rules) that were published in draft form on January 30, 2019.[1] The Chinese authorities rarely finalize draft regulations this quickly. It appears that the Chinese government wishes to enable the SSE’s Sci-Tech Innovation Board (STI Board) to better compete with the Hong Kong Stock Exchange, NASDAQ, and perhaps even the New York Stock Exchange. Other Chinese boards like Shenzhen’s ChiNext board and Beijing’s New Third Board claimed to be like NASDAQ, but investor response has not been as positive as had been hoped, and these earlier Chinese boards are not as deregulated and market-oriented as the STI Board purports to be. From the opening of the SSE stock market after Chinese New Year until the day before the finalized STI Board Rules were released, the Shanghai composite experienced its largest monthly gain since April 2015, and major banks like Credit Suisse predicted that Chinese markets would continue to prosper.[2] This suggests that investors welcome the finalized STI Board Rules. On February 11, 2019, V&T Law Firm (V&T) published an article that analyzed five characteristics of the draft STI Board Rules.[3] This client alert is an update based on the finalized STI Board Rules.

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[1] The terms “PRC” and “China” are used interchangeably in this client alert and neither includes Hong Kong, Macau, or Taiwan.

[2] Eustance Huang, “Credit Suisse on stocks: 'We love China at the moment',” CNBC China Markets, March 1, 2019, https://www.cnbc.com/2019/03/01/credit-suisse-on-stocks-we-love-china-at-the-moment.html.

[3] A V&T client alert regarding the draft version of the STI Board Rules is available at: http://www.vtlaw.cn/ueditor/php/upload/file/20190214/1550109008571307.pdf. This client alert is an update.