"Science and technology innovation board" soon became a buzzword in the capital market after Chinese President Xi Jinping proposed the launch of a science and technology innovation board at the Shanghai Stock Exchange and experiment with a registration system for listed companies at the China International Import Expo (CIIE). Though details are still pending, it has generated great expectations.

(Photo: VCG)

The launch of the science and technology innovation board is a major reform to implement the innovation-driven development strategy, promote high-quality development and help Shanghai cement its position as an international financial center and a science and innovation hub.

It is also an important step to improve the fundamental institutional arrangement of capital markets, stimulate market energy and protect the legitimate rights of investors.

The science and technology innovation board is expected to integrate capital markets and technological innovation. As technological innovation features high input, long periods and high risks, it has always been beyond the reach of indirect and short-term financing. 

Though China's capital markets have explored in recent years to enhance support for technological innovation, there's still space for a better connection between the two. The board will create more possibilities.

The board is expected to be a testing ground for the reform and innovation of the capital markets’ fundamental institutional arrangement.  A related supervision department has identified the board as incremental reform which can avoid impacts on the large market of existing stocks. To test the waters in the new field will help the country gain experience in a rapid manner and improve the fundamental institutional arrangement of its capital markets.

The pilot registration system for listed companies will have strict standards and procedures, aiming to reveal more complete and accurate information in each link such as acceptance, verification, registration, issuance and dealing. It will focus more on the stimulation of market energy and protect investors.

The board is expected to carry more inclusiveness and balance. The capital markets are for financing and investment. The board, through differentiated arrangements on profit performance and equity structure, will enhance the inclusiveness and adaptability for innovative enterprises. In addition, the board should also enhance management on investors' capital, investment experience, and bear risks, guiding them to be rational.

In addition, new mechanisms and support measures such as medium- to long-term funds should be introduced to achieve a balance between financing and investment, between primary and secondary markets, as well as between new and existing stockholders.