President Xi Announces New Stock Exchange For SMEs In Beijing

As Beijing pressures domestic companies to launch their IPOs on domestic exchanges instead of New York or Hong Kong, Beijing announced Thursday that it’s preparing to open a new stock exchange in Beijing that will host shares of “innovation-focused” small and medium-sized industries.

The new exchange will join China’s other exchanges in Shanghai and Shenzen. Reuters first reported that a new exchange was being discussed as a strategy to strengthen China’s capital markets, as financial authorities are being forced to rein in debt levels and shift their focus to equity financing instead.

President Xi announced the new exchange during a video address at the China International Fair for Trade in Services on Thursday. In other comments he pledged that China would “create more possibilities for cooperation by scaling up support for the growth of the services sector in Belt and Road countries.”

He plans to accomplish this “by deepening the reform of the New Third Board and setting up the Beijing stock exchange as the primary platform serving innovation-oriented SMEs.'”

Following Xi’s statement, China’s securities regulator issued a statement affirming that a stock exchange in Beijing would help deepen financial supply-side structural reforms and improve capital market systems. The China Securities Regulatory Commission (CSRC) said its leadership was “excited” at the prospect, would study the president’s proposal in depth and resolutely implement it. “Small and medium-sized enterprises can do great things,” the CSRC said.

The announcement comes at a time when the future of Chinese firms listing in the US is in doubt. The SEC has paused all applications from Chinese firms until they agree to meet heightened American auditing standards which Beijing has adamantly opposed, per the FT.

The launch of the new exchange comes as President Xi’s government has rolled out a series of regulatory and policy reforms in recent weeks. A crackdown that initially targeted fintech lending and antitrust and personal data abuses has expanded to embroil companies across the economy, from education and gaming to ride-hailing and food deliveries. During his speech, Xi also focused on his plans to benefit the “common prosperity”, which benefited from a $15 billion pledge from Alibaba. This is the refocus on the “redistribution of wealth” that President Xi is rolling out (supposedly) to boost the numbers of China’s middle class.

They are Communists, after all.