(Yicai) March 13 -- Chinese regulators are calling for the resumption of approvals to allow high-quality startups that are not yet profitable to go public to foster inclusive innovation.

The China Securities Regulatory Commission, the main securities regulator, recently held a meeting to propose steadily resuming the application of the fifth set of STAR Market listing standards, Yicai learned. This would enable high-quality but unprofitable technology companies to go public on the Nasdaq-style innovation board.

The fifth set of STAR Market standards permits unprofitable enterprises with a market value of at least CNY4 billion (USD552 million) and significant technological innovation capabilities to access the capital market. However, no company has utilized this channel since Genrix Biopharmaceutical's listing in June 2023, due to tightening oversight by regulators aimed at preventing unhealthy listings.

Before the meeting, Wu Qing, chairman of the CSRC, had repeatedly suggested returning to a more relaxed regulatory stance to support high-potential unprofitable startups.

Nurturing Innovation 

Tian Huafeng, president of GP Hi-Tech Capital, stated that China's long-term goals include cultivating new quality productive forces and supporting high-quality development through scientific and technological innovation. He added that capital supporting innovation needs exit channels, and introducing such channels could enhance early-stage investors' confidence and motivation, as well as foster patient capital and long-term investment, smoothing the virtuous cycle of innovation.

Tian Lihui, dean of the Institute of Financial Development at Tianjin's Nankai University, pointed out that international competition, national strategies, and the capital market's role drive startup listings. China needs to cultivate domestic leaders in semiconductors and artificial intelligence, and supporting the IPOs of unprofitable enterprises could alleviate their early-stage financing difficulties, he added.

Tian from GP Hi-Tech Capital emphasized that "high quality" refers mainly to a high level of innovation, technological content, and technical barriers, as well as significant room for growth. Meanwhile, Tian from Nankai University stressed that these companies should have independent intellectual property rights, internationally leading technologies, clear commercialization paths, and strong teams.

Relaxing the gatekeeping process could boost confidence among equity investment institutions. Tian Lihui predicted that this year, the IPO market will see a larger number of participants with higher quality and diversity, particularly in sectors such as semiconductors, new energy, and AI. Meanwhile, the share of IPOs from consumer goods and traditional manufacturing enterprises is expected to decrease.

An executive from an equity investment institution predicted that China could see between 150 and 200 IPOs this year, reversing the downturn of 100 new stocks in 2024. Last year, startups raised CNY67.4 billion (USD9.3 billion), down about 81 percent from 2023.

Editor: Emmi Laine