China’s new measures to boost its sluggish stock market

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China’s stock market has been struggling to recover from the impact of the coronavirus pandemic and the regulatory crackdown on its tech sector. The benchmark Shanghai Composite Index has fallen by more than 10% since its peak in February, while the tech-heavy ChiNext Index has plunged by more than 20%. To revive investor confidence and stimulate market activity, Beijing has announced a series of new measures, including easing listing rules, expanding stock buybacks, and encouraging mergers and acquisitions.

Easing listing rules for innovative firms

One of the key measures announced by China’s securities regulator is to ease the listing rules for innovative firms, especially those in the fields of biotechnology, cloud computing, artificial intelligence, and new energy. The regulator said it will simplify the approval process, lower the profitability requirements, and allow more flexible pricing mechanisms for these firms. The aim is to attract more high-quality companies to list on China’s mainland markets, rather than in Hong Kong or the US.

China’s new measures to boost

The move is seen as a response to the increasing competition from Hong Kong, which has been attracting more Chinese tech firms to list there under its relaxed listing rules. Hong Kong has also been benefiting from the inflow of foreign capital, as many global investors have been wary of investing in Chinese stocks due to the regulatory uncertainties and geopolitical tensions. By easing its listing rules, China hopes to lure back some of these firms and investors, and boost its domestic capital market.

Expanding stock buybacks and dividends

Another measure announced by China’s securities regulator is to expand the scope and scale of stock buybacks and dividends by listed companies. The regulator said it will allow more companies to repurchase their shares, either through cash or issuing new shares, and encourage them to distribute more dividends to shareholders. The regulator also said it will improve the legal framework and supervision of stock buybacks and dividends, and crack down on illegal activities such as insider trading and market manipulation.

The measure is aimed at enhancing the value of listed companies, improving their corporate governance, and increasing their attractiveness to investors. Stock buybacks and dividends are seen as a way to signal confidence in a company’s future prospects, as well as a way to reward shareholders for their loyalty. By expanding stock buybacks and dividends, China hopes to boost market sentiment and stabilize stock prices.

Encouraging mergers and acquisitions

A third measure announced by China’s securities regulator is to encourage more mergers and acquisitions among listed companies, especially those in the same industry or with complementary businesses. The regulator said it will streamline the approval process, support cross-border transactions, and facilitate financing for mergers and acquisitions. The regulator also said it will promote the integration of capital markets with the real economy, and support the development of strategic emerging industries.

The measure is aimed at fostering industrial consolidation, enhancing competitiveness, and promoting innovation among listed companies. Mergers and acquisitions are seen as a way to achieve economies of scale, optimize resource allocation, and create synergies among different businesses. By encouraging mergers and acquisitions, China hopes to foster more industry leaders, improve market efficiency, and stimulate economic growth.

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