August 24, 2023 marked the third anniversary of the smooth landing of the ChiNext Board reform and the pilot of the registration-based IPO system. In the past three years, the ChiNext Board has adhered to its positioning and developed with prominent growth characteristics, distinctive innovation attributes, rich industry types, and rapid marketgrowth. ChiNext has strongly supported the development of strategic emerging industrial enterprises and high-tech enterprises and actively servedthesci-tech self-reliance and self-strengthening at higher levels.The registration-based IPO reform on ChiNext has made steady progress,withthe market structure, scale, ecology and function reaching a new level.

Creating “Three High-level Features” in Growth, Innovation, and POEs

A platform for high-growth quality enterprises to go public.The ChiNext Board has a total of 1,311 listed companies whose market cap amounted to nearly CNY 12 trillion. In 2022, these companies experienced a 20% surge in revenue and a 11% rise in net profit ontheyear-on-year basis on average, with almost 80% of them reporting profits. Since the opening of the ChiNext Board, the revenue and net profitof an individual companyon average have seen an annual growth rate of 19% and 12% respectively and the total assets and net assets have grown at an average annual rate of 22% and 21%.Under the registration-based IPO system, the average income of the newly listed companies increased from CNY 1.51 billion in 2020 to CNY 2.13 billion in 2022, with acompound growth rate(CAGR)of nearly 20%, showing strong profitability and growth and substantial development potential.TheChiNextcompanies have actively offeredreturnsto their shareholders. From 2020 to 2022, the cash dividends distributed by these companiestotaled CNY 52.2 billion, CNY 69 billion, and CNY 84.8 billion, respectively. In 2022, 430 ChiNext companies distributed profitsat a rate of more than 30%, showing strong cash dividends.

A source of high-level innovation and entrepreneurship momentum.Under the registration-based IPO system, almost 90% of thenewlylisted companiesonare high-tech ones and over 50%of themoperates in the strategic emerging industry. The ChiNext Board has attracted a number of high-quality enterprisesfeaturingcore technology and innovation capabilities such as Empyrean Technology and Anhui Landun Photoelectron, demonstrating obvious innovative features.The newly listed companies on the ChiNext Board primarily encompass five major industries: new generation information technology, high-end equipment manufacturing, new energy, new materials, and biology. There are nearly 900 companies inthethree key fields of advanced manufacturing, digital economy, and green and low carbon, showcasing clustering development trend inadvantageous industries. The ChiNextcompanies have a total of more than 530,000 R&D personnel and over 310,000 patents. The years from 2020 to 2022 have witnessed continued increase in R&D investment with an average R&D investment CAGR of 25%.

A main front for high-quality private-owned enterprises.The ChiNext Board has over 1,000POEs, representing over 80% of the total ChiNext companies and over 30% of the totalPOEs listedin the A-share market. More than 90% of the newly listed companies are listed under the registration-based IPO system. The ChiNext Board actively supports the high-quality development of private enterprises. It has nurtured 10POEs with a market valueat theCNY 100-billion level and a batch of benchmark enterprisesin the new economy featuringleading demonstration effects in China and worldwide such as Contemporary Amperex Technology and Shenzhen Mindray Bio-Medical Electronics. In 2022, the private enterprises listed on ChiNext reported an operating revenue of CNY 2.7 trillion andanet profit ofover CNY 200 billion, representing a year-on-year growth of 21.8% and 12.1% respectively. The R&D investment amounted to nearly CNY 140 billion, an year-on-year increase of 22.2%.Listed POEsare encouraged to utilize the innovative system of capital market. The first companies having refinancing classified review and granting Class II restricted stock equity incentives are POEs.

“Three Transparents and TwoImprovements” Campaign to Improve Regulation Service

We have firmly pushed forward the “Three Transparents”project. First,we make intensified efforts in promoting transparent review and ongoing construction of transparency and establish and publish over 200 items of review focusto ensure that the review authority is transparent to the public.We have perfected an approval and consultation communication mechanism, refined and improved the pre-application & pre-communication system process, and streamlined the communication procedures, facilitating the enterprises' preparation before declaration.

This year, 137 rounds of pre-communication have been completed, with a year-on-year increase of nearly 3 times.We have adhered to the principle of making public all the things that should be public toenhance the quality and efficiency of communication during review and improve the communication hierarchy on intricate and challenging issues. Since the start of this year, over 130 visits and communications have been received from enterprises under review, averaging 1 visit per working day. 

Second,we havedeepened transparent supervision, facilitated multi-channel disclosure, made the supervision public,and consistently disclosed typical cases of supervision via approval dynamics.We have enhanced the ChiNext positioning requirements through business training and other means and shouldered the accountability as a gatekeeper through centralized interviews with sponsors and making public the representative cases.We have improved the supervision mechanism suitable for the registration-based IPO system reform, deepened“scientific supervision, classified supervision, professional supervision and continuous supervision”, fully disclosed the self-regulatory supervision rules,and built a concise, clear, understandable and effective rule system to promote the construction of daily supervision manual system and the normalization and standardization of daily supervisory procedures.

Third,we have deepened transparent service by establishing a transparent service card mechanism, improving the return visit system, intensifying the industry-region dual-drive working mechanism and the stock-debtintegrated cultivation mechanism, and launching a series of transparent service manuals to carry out “transparent service training” and other cultivation activities and enhance the market service transparency and coverage.

We have promoted the review quality and efficiency and fostered a clean and honest culture. We implemented the action plan of “double improvement of review quality and efficiency”. By strictly regulating market entry,we have enhanced the importance, necessity and relevance ofreview inquiries. Through improving the quality and efficiency of review inquiries,we have boosted the enhancement of both the information disclosure quality in prospect uses and the quality of intermediary agencies. We have actively propelled the implementation of classified review on refinancing projects to give full play to the functional advantages of small-scale rapid refinancing. As a result, from acceptance to registration,the relevant projects can be completed within an average of 10 working days. We have also implemented the action plan for “improving clean and honest culture” and launched the initiative of “creating a transparent, clean and high-quality registration-based IPO system” to strictly prevent the behaviors of“enlisting and corrupting party leaders and cadres”.We have earnestly carried out the integrity commitment system for issuers and sponsors and strictly dealt with the projects under review that involve bribery and other violations of laws and disciplines in accordance with the law to create a clean and positive market ecology for the comprehensive implementation of the registration-based IPO system.

Promoting the Construction of anInnovativeEcosystemto Serve Sci-tech Self-reliance and Self-strengthening at Higher Levels

The positioning has beenclearer. ChiNext has set diversified listing standards, simplified the issuance conditions, optimized and improved the quantitative evaluation standard for “enterprises that align with the trends of innovation, creation, and originality or the deep integration of traditional industries with new technologies, new industries, new business forms, and new models”.We have strictly implemented the “negative list” and allowed the listing ofhigh-quality enterprises not having made a profit, enterprises with special equity structure and red-chip enterprises to continuously enhance the inclusiveness and attractiveness of ChiNext. Hence,better service to high-tech enterprises, strategic emerging industry enterprises, and growing innovative enterprises.

The market mechanism has becomesounder.We have perfected the market-oriented price inquiry, pricing and placement mechanisms,displaying obvious characteristics of “good price for excellent enterprises” for the issuance of new shares and bringing continuous improvement in the market pricing capability.The market-oriented level of refinancing and M&A has been further improved, with 530 companies’ refinancing registration effective and 49 companies having restructuring completed, to support listed companies in growing better and stronger. We have improved the delisting standard and simplified the delisting process to promote the formation of a normalized delisting pattern of “allowing entry and exit” in a merit-based manner.

The investor structure has seen continuous optimization.  The trading proportion of institutional investors on the ChiNext Board saw a rise from 16.5% before implementing the registration-based IPO system to the current 34.6%, along with an increase in their shareholding ratio from 47.5% to 50.6%. Specifically, the shareholding ratio of public funds increased from 7.2% to 8.1%, while that of long-term funds including insurance, annuity, and social security grew from 2.7% to 3.1%. The investment channels for foreign investors have been expanded. The Shenzhen-Hong Kong Stock Connect now includes a wider range of ChiNext companies, withthe number of ChiNext stocks and their proportionhaving steady increase and theunderlying securitiesscopehavingbeen extended to includesuchChiNext index funds as the ChiNext ETF and the ChiNext 50ETF. There are a total of 546 ChiNext stocks under the Shenzhen-Hong Kong Stock Connect,which represents 41.7% of the total number of stocks on ChiNext and marks a 12.9% increase, or 306 stocks, from that before implementing the registration-based IPO system.

The investment-side products have been more attractive.We have developed 67 ChiNext index fund products, with the tracking capital size up to CNY 120 billion. Sample companies of the ChiNext Index have strong profitability. In 2022, almost 50% of the them reported a net profit exceeding CNY 1 billion. This year, investors have increased their fund allocation to the ChiNext ETFs. The net inflow of funds has reached approximately CNY 30 billion,making ChiNext Index one of the indices featuring the highest net inflow of funds this year. Since the launch of the ChiNext ETF Option, its scale has steadily increased and its trading volume has consistently ranked among the highest in the world among similar derivatives. In addition,its risk management function has been effectively utilized to foster the growth of indexing investments.

The formation of aninnovative capital center has beenaccelerated. We have been encouraging high-quality capital flow to join the innovation trend. Before going public, 678 ChiNext companies have attracted nearly 2,600 times of investment from venture capital institutions,with the investment totaling more than CNY 67 billion. After the implementation of the registration-based IPO system, the participation of VC institutions and the amount of investments have shown significant growth, increasing by 1.4 times and 1.6 times respectively compared tothat before the implementation. This has led to the proliferation and expansion of numerous VC institutions, promoting a positive cycle of science & technology, industry, and capital. The effectiveness of the whole life cycle service system has been further enhanced.We have created an integrated digital and intellectual service platform “from IP to IPO and to post-listing excellence” and set up a trading center for scientific and technological achievements and intellectual property rights.We havedeepened the synergy with such platforms as V-Next,“Pei Yu Tong” and “Cheng Zhang Tong” to improve the localized service system and bring into full play the synergy of all market parties,thus better serving the national innovation-driven development strategy and promoting the construction of a vibrant innovation ecosystem.