China launches STAR, tech stock market to boost industry

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The market, modeled on the U.S.-based NASDAQ, reflects the ruling Communist Party’s desire to channel private capital into its development plans

. It gives small Chinese investors a chance to buy into tech industries that until now have turned to Wall Street to sell shares.The STAR Market has no direct link to Beijing’s tariff war with President Donald Trump over U.S. complaints China steals or pressures companies to hand over technology. But it will raise money for industries some American officials see as a competitive threat to U.S. technology leadership.

China’s stock exchanges in Shanghai and the southern city of Shenzhen were set up in the early 1990s to raise money for state industry. They have expanded to include private enterprises but still are dominated by government-owned companies such as PetroChina Ltd. and China Mobile Ltd. The STAR Market has more lenient standards for profitability and price volatility than the main exchanges. The Shenzhen Stock Exchange launched its own second board, dubbed ChiNext, in 2009 for small, faster-growing companies.

Allowing companies to sell shares before they are profitable will encourage development of Chinese venture capital by allowing early investors to recover some of their money, said Lu of Industrial Bank.Shares on the new market can swing by 30 per cent in price before regulators will impose a 10-minute trading halt. The main exchanges halt trading for the day of any stock that rises or falls 10 per cent in price.

 

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