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Nine years ago, on October 30, 2009, the representatives of 28 companies gathered in SZSE's listing hall to ring the gong for being the first to be listed on ChiNext. After the nine years of hard work, the number of ChiNext listed companies has increased from 28 to 734, with a total market capitalization of nearly CNY4 trillion. This has formed a demonstration effect among innovative venture enterprises, continuously injecting new momentum into China's economic transformation and upgrading.
Since its establishment, ChiNext has always kept in mind its mission, fully implemented the national innovation-driven development strategy, continuously consolidated the foundation for development, and continued to improve its functions. Under the macro background of deepening supply-side structural reform, it has provided a strong guarantee for the support of the healthy growth of innovative venture enterprises, the construction of a multi-dimensional and innovative capital ecosystem, and the facilitation of the high-quality development of the economy. ChiNext has become an important part of the capital market to serve the real economy.
This year also marks the 40th anniversary of China's reform and opening up. At the 9th anniversary of ChiNext's establishment, we look forward to the new chapter of its development in the future. It will adhere to the purpose of serving the real economy and supporting the development of innovative enterprises. Besides, ChiNext will deepen reform, strengthen supervision, prevent and control risks, improve services, and facilitate the quality, efficiency and driver upgrades for economic development, so as to fulfill the mission and tasks entrusted by the new era.
Ⅰ.On Capital — the Source of Integrating Running Capital and Innovation
ChiNext attracts and mobilizes social capital to participate in the whole innovative venture process of enterprises. It plays the capital market role as the main channel in the process of M&As and industrial integration, and creates a source of vitality for the effective integration of innovation and capital.
Significant Improvement in Financing Capacity
As of the end of October 2018, the total initial financing volume of the 734 ChiNext listed companies was CNY382 billion, while the refinancing volume was CNY325.3 billion. Such direct financing provided strong financial support for industrial development. Meanwhile, as public companies, open and transparent operation and financial status are more conducive to obtaining indirect financing from banks and enjoying more simplified financing procedures and lower financing costs. According to statistics, after they were listed for a year, the chance of getting bank loans increased by 42% year-on-year. A variety of financing methods were implemented to help enterprises get funds for the real economy in a timely manner, which further promoted innovation and development.
Positive Cycle of Innovation and Capital
More than 60% of companies were supported by PE/VC when they were listed on ChiNext, with the amount totaling more than CNY33.6 billion. VC institutions also realized investment return through listing withdrawal, creating conditions for a new round of innovation capital formation. Meanwhile, by means such as setting up industrial M&A funds, ChiNext listed companies invested in the technological innovation industries, which mainly are information technology, bio-medicine, artificial intelligence, and high-end equipment. Innovative capital and listed companies have become indispensable parts of the innovation chain to jointly promote the healthy development of the innovation ecosystem.
Make Good Use of Capital to Promote Industrial Integration
As of the end of September 2018, ChiNext has completed 372 reorganizations, with a total transaction amount of CNY331 billion. More than 70% of these reorganizations were industrial integration. Among them, 315 reorganizations, accounting for 85%, involved the payment of considerations for share offering, with the payment totaling CNY231.7 billion which is 70% of the total transaction considerations. Listed companies made full use of capital market instruments to speed up development and expand development space.
Ⅱ.On Industry — Innovation Banner for the New Economy
ChiNext has gathered a group of influential and competitive emerging industry companies. They continuously invest in R&D and innovation, and lead industrial structural adjustment. Their operating incomes have always maintained rapid growth, which has made them become an innovation engine for promoting quality economic development in the new era.
The Main Battlefield for Innovation-Driven Development
Among all ChiNext listed companies, over 90% companies are high-tech enterprises; more than 70% companies fall into strategic emerging industries; 261 companies have projects of the China Torch Program; 85 companies have projects of the National High-tech R&D Program (863 Program); and 65 companies are national innovation pilot enterprises. Through going listed to inject capital into technological innovation, ChiNext companies have become the group with the most innovative potential in China. In the past nine years, the cumulative R&D expenditure has accounted for more than 5% of operating income. ChiNext has distinctive characteristics and it has formed a demonstration effect and a virtuous circle, attracting more and more high-quality innovative companies to choose to get listed on ChiNext. More than 60% of the information technology companies are on ChiNext while those in medical health and Internet culture fields are 30% and 40% respectively.
ChiNext Companies Performing Stable and Heading to the Better
The average operating income of ChiNext companies has grown rapidly for nine consecutive years, increasing from CNY305 million in 2009 to CNY1.553 billion in 2017, with an annual compound growth rate of 20%. Their average net profit increased from CNY58 million in 2009 to CNY125 million in 2017, with an annual compound growth rate of 9%. As of the end of 2017, 10 companies on ChiNext had revenue of over CNY10 billion and 12 companies on ChiNext had a net profit of over CNY1 billion. A group of outstanding companies used ChiNext to become better and stronger and grow into industry leaders.
Ⅲ.On Talents — the Foundation of Innovation and Venture
ChiNext has built a strong bond between capital and talent stimulus, allowing the two to promote each other and share development. This has boosted the transformation of technical achievements, attracted capital to constantly keep an eye on emerging technologies, and stimulated technical talents to keep devoting in innovation, which sets up examples of hard work for broad entrepreneurs.
High-end Talents Underpin "the Base"
133 ChiNext companies have de facto controllers who used to serve in colleges and universities or scientific research institutes. Thirty-seven ChiNext enterprises have/had been shareholders of colleges and universities or scientific research institutes. Fourteen ChiNext components were reformed from scientific research institutes. Sixty-three ChiNext corporations have 97 founders, directors, supervisors, senior executives or core personnel who were short-listed in the national or local "Recruitment Program of Global Experts". Forty-eight ChiNext units are start-ups founded by "overseas returnees". ChiNext has provided a growth platform for all these leading technical talents, creating a favorable environment for achieving the aim of "Made with Wisdom in China".
Core Backbones Gather and Share
ChiNext companies are relatively small in scale and mostly in the stage of development, thus having limited cash flow. As a result, stock option incentive has been an important means for them to attract and retain outstanding talents. By the end of September 2018, about 60% of ChinNext companies have introduced stock option incentive plans that cover more than 50,000 core staff. Around 30% of ChinNext enterprises has developed employee stock ownership plans, which bind the corporate development with staff interests, to establish stimulus mechanisms that let the companies and the staff share interests and risks to promote sound development of the companies.
IV. On Mechanisms — Exploring New Paths via Pilot Efforts
ChiNext has always been a test field of China's capital market reform, constantly exploring mechanism innovation and intensifying supervision. In a higher-quality market operation atmosphere, it has perfected capital market systems to serve innovation and venture and boost quality economic development.
Differentiated Systems Highlight Innovative Genes
To fully reveal ChiNext companies' features in business and profitability models, ChiNext first introduced the information disclosure guideline for film, TV and medical industries in 2013. Then it also successively issued 10 guidelines for such emerging industries as energy conservation, internet gaming and medical equipment, having improved the readability, comparability and efficiency of emerging enterprises' information disclosure and gradually forming a industrial guiding rule system.
In 2014, the ChiNext refinancing system was officially implemented. The institutional innovation represented by "small-amount and quick" private placement mechanisms matches with ChiNext companies' financing features of "small steps and sprint". In addition, the differentiated pricing methods and lock-up requirements, together with such measures as allowing "no sponsors or underwriters", have given market players with more autonomy.
Optimize Investor Structure to Hold Fast to Regulatory Bottom Line
At the outset of its establishment, ChiNext set up the investor suitability management system and has strictly practiced it. By way of improving investors' years of transaction experience, it has helped effectively identify investors featuring venture capital capabilities, which enhance investors' market bearing capacity and risk awareness.
In 2012, ChiNext further optimized the delisting system by adding market-oriented delisting indicators and delisting standards, perfecting delisting risk warnings, shortening the time span of listing suspension and termination and tightening the standards of listing resumption. This has directly moved forward the reform of a round of delisting system and constantly driven the ongoing improvement of fundamental systems of China's capital market.
Scientific and Technological Supervision Improves Risk Prevention and Control
During the development of ChiNext, SZSE has constantly improved technical means to safeguard stable, sound and smooth market development. The equity pledge risk detecting platform, which is connected with the settlement and broker membership database, conveys shareholder pledge data in time, achieving risk pre-warning.The surveillance system, equipped with big data analysis function, detects inside transactions effectively. And the fifth-generation management system on information disclosure collects various corporate information through the newly introduced "enterprise portraits" function, which allows us to precisely grasp and urge enterprises to prevent and resolve various risks.
V. On Responsibility — Undertaking the Mission Borne in Mind
Responsibilities and development go hand in hand. A vast majority of ChiNext companies maintain quick development while actively performing their social responsibilities. They keeps rewarding investors and serving the coordinated development of regional economy and the poverty alleviation course, having made remarkable contributions.
Major Contribution in Revenue and Employment
The private, small and medium enterprises are the new force of national economy, innovation and entrepreneurship and the underlying force of social and economic development, having made major contributions to national revenue and employment. In 2017, ChiNext companies cumulatively contributed around CNY62.6 billion in taxes, created 1.38 million jobs and paid CNY149.1 billion in staff remuneration, achieving significant year-on-year growth. By pushing the development of private, small and medium enterprises, ChiNext has played an active role in increasing revenue and offering employment.
Active in Dividend Distribution and Sincere in Rewarding Investors
As of 2017, ChiNext companies have distributed a total dividend amount of CNY110 billion. In particular, 202 companies continue to offer dividend after listing. In 2017, 613 listed companies, 86% of the total ChiNext component, paid cash dividend. Ever since the opening of the ChiNext board, the ratio of companies conducting cash dividend distribution has maintained at more than 85%, which is higher than the market average.
Assisting Regional Economic Development
ChiNext companies scatter in 29 provinces and cities. Among them, 59 companies are in western China and 85 companies are in the middle area. This kind of layout is positive in aiding the rejuvenation of villages and serving the coordinated development strategy, and, to a certain extend, relieves the problem of uneven development of the regional economy. There are 222 companies that are based in prefecture, town or village levels and this provides industrial support for urbanization construction. The ChiNext board has fully taken advantage of its innovation demonstration and aggregation effects, with 259 Guangdong-based companies having aided the transformation and upgrading of the regional economy.
VI. On Reform — Sailing with Gathered Strength
With the further advance of supply-side structural reform and national innovation-driven strategy, the emerging industry has become a new engine of China's economic growth. A lot of technology innovation and cutting-edge enterprises keep springing up, and so do the new economies, industries, business format and models. This has raised greater appeals to the reform and development of the ChiNext board.
Recently, the State Council has published the Opinions on Advancing Quality Innovation and Venture Development for Upgraded Innovation and Entrepreneurship to support the listing of innovative enterprises featuring great development potential but having not made a profit yet and allow technological enterprises to carry out the governance structure of "same shares with different equities". SZSE will sincerely implement the policy requirements of the CPC Central and the State Council, act accordingly with the deployment of the CSRC Party Committee, and stick to the mission of serving real economy and innovative enterprises. By further driving ChiNext reform, perfecting institutional arrangements for the development of innovative and growing enterprises, enhancing the inclusiveness of the ChiNext board and increasing the support towards the listing of technological and innovative enterprises, SZSE aims to fully bring into play ChiNext's support and leading function on innovation and entrepreneurship.
As time goes by, the ChiNext board has stayed true to its mission and will always stick to the role of serving innovation and entrepreneurship and the general picture of the real economy.
Hoping to the future, the ChiNext board keeps marching on and will continue to explore the fundamental policy for the market, deepen the reform and lead a new transform.
