China considers establishing growth enterprises market

By Shangguan Zhoudong (
Updated: 2007-06-12 14:01
Large Medium Small

The growth enterprises market (GEM), which targets China's plentiful small- and medium-sized enterprises, is under preparation, according to Wang Shouren, secretary general of the ShenzhenVenture CapitalAssociation.

Wang said public opinion is being solicited on the draft plan for the market and when it will be launched is still unknown.

It's inadvisable to transform the current small- and medium-sized enterprise board (SME board) to the GEM, due to the fact that the GEM is a board with great risks, Wang said.

Related readings:
China considers establishing growth enterprises market Market capitalization down 1.35% following stock correction
China considers establishing growth enterprises market Confidence urged in stock market
China considers establishing growth enterprises market No plan on capital gains tax yet, says report
China considers establishing growth enterprises market 
SMEs offer opportunities for global PE funds
China considers establishing growth enterprises market 
Banks urged to lend more to SMEsChina considers establishing growth enterprises market Listed SMEs report rising profit

China's SME Board was launched in 2004, trading within a special market section within theShenzhen Stock Exchange(Shenzhen Main Board), and one that has an independent trading system.

The goal of the board is to introduce a new financing platform for SMEs without lowering the listing requirements and to help those high-tech SMEs with growth prospects to list on the Shenzhen Stock Exchange.

The SME Board is a subordinate of the Shenzhen Main Board. Listed companies on the SME Board have to abide by the main board listing rules.

Wang suggested that companies which want to list on the GEM Board should meet the requirements set by the Company Law and the Securities Law.

According to the laws, for a company to be listed on the GME board, its share capital cannot be less than 50 million yuan (US$6.51 million) and is required to have been in business for more than three years; and the combined sales revenues of the company in the previous three consecutive years cannot be less than 100 million yuan and sales revenue for the last year can't be less than 50 million yuan, and entrants are required to show a three-year profit record, which can’t be less than 10 million yuan in the previous three consecutive years and net profits for the last year can't be less than 5million yuan.

Wang pointed out that companies to be listed on the GME board should focus on high-tech and agricultural enterprises, which the government gives more supportive policies.

Wang also encouraged enterprises involved in new businesses such aschain stores, e-commerce, transnational operations and overseas enterprises selling advanced technologies to list on the board.

He also put forward some other suggestions on the GME including risk prevention, an information disclosure system and venture capital development.

Regulators should give listing priority to those SMEs with venture capital investments, and extend the lockup period, Wang said.

Hong Kong's GEM, which was founded in 1997, has long been troubled by lukewarm transactions and loss of high-quality firms.

In the year 2006, a total of 198 companies listed on GEM, 1.49 percent fewer than the previous year's 201. Although its market capitalization for the year of 2006 soared 33.45 percent to HK$88.9 billion from HK$66.6 billion, the sum is a pittance compared to the astronomical sum recorded on the Main Board.

Statistics from Hong Kong Exchanges and Clearing Limited show that at least 975 companies successfully floated their shares on the Main Board last year, with a market capitalization of HK$13,248.8 billion, representing a dramatic increase of more than 63 percent from the year earlier.