Chinese companies and investors are lining up in spades to take part in Shanghai’s new Nasdaq-style tech board, with a groundswell of patriotic support surging further after the US blacklisting of telecom firm Huawei inflamed trade tensions.
In the two months since the application period began, 120 firms - many in industries such as semiconductors, artificial intelligence and biotech - have sought permission to list, aiming to raise a combined $16 billion.
By comparison, IPOs on Shanghai’s main bourse last year raised $11.7 billion while those on the Shenzhen exchange raised $8 billion, according to Refinitiv data.
On the investment side, there’s been a rush to launch tech-focused mutual funds, with about 100 currently seeking approval, data from the China Securities Regulatory Commission shows. Since late May, 12 such funds targeting the new board, each with a fundraising cap of 1 billion yuan ($145 million), have been launched.
The first mainland China exchange-run board to not make profitability a listing requirement, Shanghai’s Sci-tech Innovation Board was announced suddenly by President Xi Jinping in November and is widely seen as Beijing’s latest move to become self-sufficient in core technologies such as chips.
Those ambitions, highlighted by the government’s “Made in China 2025” campaign launched four years ago, have now taken on added urgency as the trade war with Washington and anxiety about its impact escalate.
“The trade war is no longer simply about China importing more soybeans, or reducing trade deficits,” Shi Donghui, director of the Shanghai Stock Exchange’s Capital Market Institute told a financial forum last month after U.S-China trade talks collapsed.
“It’s essentially a tug of war around industry supply chains and core technologies,” he said, adding that as the two economic powers vie for tech supremacy, exchange staff were working day and night seven days a week to make the new board a success.
Washington’s ban in May on US firms doing business with Huawei without government approval highlighted gaps in China’s tech prowess and has fueled patriotic enthusiasm for the board.
If the new board can foster internationally competitive technologies, “Trump will no longer be able to choke us,” said Zhou Xiangyong, general manager of Guotai Asset Management, a Shanghai-based mutual fund house.
“China must turn external pressure into internal drive,” said Pan Jiang, CEO at private fund manager Shanghai V-Invest Co, which recently launched eight funds targeting the new board.
China Galaxy Securities estimates domestic mutual fund houses alone could pump more than $40 billion into the board, with about a third of that coming from new funds launching over the next six months.
In addition to allowing loss-making firms to list, the new board is doing away with paternalistic guidance from regulators on IPO pricing and timing - developments that have some bankers and investors calling it China’s boldest market reform yet.