Distinguished guests, ladies and gentlemen, good morning,
The Shenzhen Stock Exchange held the first experience-sharing conference on corporate shareholding structure reform in Hangzhou in 2004, aimed at providing a platform of communication for capital markets to better serve local economic development. Ten years later, we are gathered here again by the West Lake. The situation has changed significantly. The multi-tiered capital market system has basically taken shape and will continue to undergo profound changes. Regional financial support system offered by local governments has made great progress, providing us with a new foundation, vision and theme for our discussion.
First of all, I would like to take this opportunity to brief you on the latest development in the multi-tiered capital market of the Shenzhen Stock Exchange.
The SME Board and ChiNext Market are being strengthened according to the State Council’s Nine-point guideline which requires enhanced growth in the SME board and accelerated reform in the ChiNext market.
This year marks the 10th anniversary of the SME Board and the 5th Anniversary of the ChiNext Market. Thanks to strong support by local governments, the two market sections have made remarkable progress. By November 10, 2014, the SME Board had 726 listed companies and the ChiNext market had 400 listed companies. The SME Board has a wide industrial coverage, concentrating a group of leading enterprises in their niche sectors. The ChiNext market hosts a cluster of innovative companies. 94% of ChiNext-listed companies are certified high-tech enterprises and 73% are from strategic emerging industries. They are an effective force in bolstering economic restructuring and upgrading in their regions.
During the activities marking the fifth anniversary of the ChiNext Market, parties from all walks of society fully recognized ChiNext Market’s achievement in fostering emerging industries and promoting independent innovation. Moving forward, we will push forward the ChiNext Market’s reforms in market access, refinancing, equity incentives and other institutional designs to be more responsive to innovation, growth characteristics and needs of enterprises; And in the context of reforms in the registration-based IPO system, we will evaluate means to speed up the reform in the ChiNext Market and enhance its role as a powerhouse to allocate the capital supply chain around innovation chain. In the process, more and more social capital will be channeled to technological companies and SMEs, forming a deep social base and intrinsic capacity of the market to support innovation-driven development.
We are actively promoting institutional innovation for mergers and acquisitions.
In recent years, the SME Board and the ChiNext Market have witnessed highly active M&A activities. From its inception till the end of October 2014, the SME Board had seen initiation of 185 restructuring plans, involving 270.9 billion yuan (USD 44 billion). 95 SME Board-listed companies have completed corporate restructuring involving a total transaction value of 95.5 billion yuan (USD 15.5 billion). From its opening till the end of October 2014, the ChiNext Market had recorded 222 trading suspensions due to pending restructuring plans, demonstrating an explosive growth trend in M&A. 110 restructuring-related suspensions were recorded in the first 10 months of 2014. Among them, 136 major asset restructuring plans have been released involving total M&A value of 78.103 billion yuan (USD 12.7 billion).
To encourage listed companies to grow in size and strength through mergers and acquisitions, we actively promote reforms in related systems on one hand. The SME Board- and ChiNext-listed companies mostly conduct mergers and acquisitions for consolidation in their industries or integration of upstream and downstream supply chains. As a result, they have a high requirement time efficiency of auditing services and flexibility in pricing and payment. To this end, we actively promote simplification of M&A review process and support market-oriented pricing and diversification of M&A tools. For example, we recently launched M&A private placement bond instrument. On the other hand, we have taken a series of measures in closer response to business needs and special features of M&As of listed companies at the SZSE. For example, we organize regular M&A training programs and conferences to offer a platform bringing together listed and unlisted companies in the same industry. We organized Exhibition Against Insider Trading to prevent insider trading cases often seen in mergers and acquisitions involving listed companies. We have made joint research with Associations of Listed Companies to bring forward deep-seated problems and hurdles in institutional mechanisms of M&As involving listed companies.
We are developing the SME private placement bond, asset-backed securities and other fixed income products to alleviate SMEs’ financing difficulties of and provide new financial solutions for the nation’s urbanization and infrastructure projects.
Besides strong development in the equity market, the Shenzhen Stock Exchange has diversified financing instruments, providing financing services for SMEs and emerging industries. Among them, the SME private placement bonds are designed to serve small and micro enterprises. By the end of October, 344 SMEs have filed for private placement bond issuance with the SZSE. And 224 SMEs have completed 277 private debt issuances, raising 29.96 billion yuan (USD 4.8 Billion).
Asset-backed securities (ABS) are an innovative instrument that the Shenzhen Stock Exchange attaches great importance to. Since 2005 a total of 37 special asset management plans have been issued with cumulative financing of 66.6 billion yuan (USD10.8 billion). And 24 of the special asset management plans have been listed on the Shenzhen Stock Exchange’s block trade platform raising 31.25 billion yuan (USD 5 billion). The most influential projects include Alibaba 1-9, Nanjing Urban Sewage Usufruct, Xiamen Jianfa Heshan Shantytown Redevelopment and Xuzhou Affordable Housing Development. On the basis of the experience accumulated from pilot projects, we will further broaden underlying assets and explore diversified modes of operation. We will facilitate a new round urbanization and expand financing channels to serve infrastructure development in the country.
Second, since the promulgation of the new nine-point guideline by the State Council, the capital markets have demonstrated progress in reform and innovation in all fronts and breakthroughs in key areas. On the basis of serving the real economy, the multi-tiered capital market has been given greater scope and a more urgent task of serving the local economy, which is mainly manifested in the following aspects:
With accelerated development and improvement of the multi-tiered capital market system, a new market platform has taken shape to serve the local economy. Besides the SME Board, the ChiNext Market and the new OTC market, regional equity markets and private equity platforms have seen rapid development. The latter two markets feature high flexibility, demonstrating the nature of "grassroots finance". Their strong penetration in local economic development is irreplaceable. At present, many regions have taken pilot programs and obtained some experience. On the back of these new market platforms, a cluster of micro-finance companies, institutions, products, information and resources have emerged in some regions. Services are provided to local businesses through the integration of various financing resources.
In the overall context of deepening reforms, the capital market has found a new connecting point in serving local economic development. For example, the country is launching reforms in state-invested and state-owned enterprises. It is a consensus that the integration of state-owned assets and private capital will be the highlight of a new round of SOE reform and the capital markets is the main channel for the mixed ownership reform. Management shareholding scheme was introduced in the merger and acquisition of Chengfei Integration’s mixed ownership structure intermediated by CATIC Securities. Earlier this year, Tencent become second largest shareholder of NavInfo next only to the state shareholder. These are two typical case of mixed ownership reform. This afternoon we will invite CATIC securities, NavInfo and other guests to share experiences in mixed ownership reform.
Local financial services put forward new demands for the capital market. In the process of readjusting the model of economic growth and economic restructuring, innovation-driven development strategy is in full implementation. All regions in in country are required to continuously optimize traditional industries and actively cultivate emerging industries. Both tasks require right financial solutions. The level of diversification and urgency for financial services in regions across the country is unprecedented. At the same time division of responsibilities between the central and local governments in financial regulation and risk management is increasingly clear, with local authorities shouldering more responsibilities for local financial management. Our recent research indicates that more is expected from financial offices and other local financial authorities and new requirements have been proposed for the capital market and exchanges.
I would like to emphasize that the Chinese economy is entering a stage of new normal, where economic transformation and upgrading is more urgent than ever before. It is a multi-tiered capital market’s most fundamental starting point and foothold to serve the real economy. To this end, we should exert all efforts to build a support system to ensure the best performance of the basic functions of the multi-tiered capital market.
We are continuing to strengthen cooperation and jointly promote development of the multi-tiered capital market system.
The Shenzhen Stock Exchange’s service for the local economic development started with fostering potential issuers in corporate restructuring but expanded to a much wider scope. It has long been a subject of interest for us to integrate the capital market with the financial support system for SMEs, technology-financing system as well as regional financial ecosystems. Through continuous exploration, we have deepened our understanding of the multi-tiered capital market’s mission and its path of development. We have deeply felt that a multi-tiered capital market tailor-made for China's economic transformation will be serve the real economy at a higher level and in a broader scope. At this moment, we understand that more need to learned and done to promote financial innovation and facilitate fresh growth in the real economy, as we face the widespread and acute problem of poor access and high cost of SME financing, hurdles in share capital formation in emerging and innovative companies and urgent demands for local financial services. Recently, several new projects have been carried out in this regard. We hope to work together with you to promote progress in the following areas:
We have started the "SME Growth Roadmap 2.0" to improve overall service capability for medium, small and micro hi-tech enterprises. In order to implement the national strategy of independent innovation, we started to foster hi-tech SMEs for IPO within hi-tech parks 10 years ago. The Shenzhen Stock Exchange, along with the Torch Center of the Ministry of Science and Technology launched the "SME growth roadmap", also known as Roadmap 1.0. This program has continued for a decade. On this basis and with co-sponsorship of the Torch Center, the Shenzhen Stock Exchange, the new national OTC market and China Merchants Bank, an upgraded version or the "Roadmap 2.0" was officially launched on October 30, 2014. And the first docking roadshow and training activities were held in Xi'an. "Roadmap 2.0" will make full use of modern information technology to create a unified platform for government departments, high-tech parks, capital markets, financial institutions and third-party professional service intermediaries. The platform will offer full information sharing, process interoperability, complementary functions and provide comprehensive, full lifecycle financing and integrated services for high-tech SMEs.
We have intensified market cultivation and initiated Home for Finance Offices Program.
The Shenzhen Stock Exchange has always attached great importance to cooperation with regional finance offices and High-tech Zones across the country. We held eight consecutive seminars for local financial cadres and nine session of experience sharing for local governments on facilitating corporate restructuring and public listing. To further integrate resources and deepen service, we have launched Home for Finance Offices this year. Focused on achievement demonstration, interaction, communication, mutual learning, training and regional equity platform (fourth board) development, the program promotes mutual visits, information and resource sharing between the Shenzhen Stock Exchange and the Finance Offices and among finance offices across the country. This year we published Reader of Working Knowledge of Capital Markets for Local Government Officers. The Shenzhen Stock Exchange launched the first Heart to Heart Essay Contest for local finance offices and invited more local finance cadres to visit the exchange. Two batches of local finance cadres have completed their secondments to Shenzhen Stock Exchange.
We will further improve Home for Finance Offices’ mechanisms of cooperation to strengthen development of regional capital markets, intensify publicity of local finance offices’ excellent work experience and help improve local finance cadres’ understanding of the capital market. The Shenzhen Stock Exchange is committed to deepening cooperation with local finance offices. We welcome more comments and suggestions for the Home for Finance Offices Program.
We support local governments to improve financial support system for SMEs.
The Third Plenum of the 18th CPC Congress proposed that the market shall play a decisive role in allocating resources. Work to comprehensively deepen reforms is being implemented. As far as we know, local governments are constantly introducing innovative systems of financial support for SMEs and adopting more and more market-oriented approaches. For example, new government seed funds has moved from the traditional direct subsidies to equity holding and other means of joint investment. With optimization of fund raising, management, investment and exit modes, an integration of the efficient market and proper government actions has been formed in concrete manifestation of implementing the Central Government’s requirements. In addition, with the development of the Internet and big data, there is a broad prospect of harnessing technological means to solve the financing problems. Leveraging on the development of Internet finance, we can improve the capacity of financial supply and enhanced financial inclusiveness. We are paying close attention to these emerging trends and will organize experience-sharing sessions, build information-sharing platforms and support local equity markets. This afternoon we will have a dialogue session on related topics.
Ladies and gentlemen, distinguished delegates, support and participation from all walks of society, especially local governments are indispensable to healthy and orderly development of the multi-tiered capital market. The Shenzhen Stock Exchange will strengthen communication, coordination and cooperation with all interested parties and promote the multi-tiered capital market in a concerted effort. I look forward to your in-depth discussion and unreserved comments. I would like to wish this conference the best of success!
Thank you!