Capital formation in support of innovation: meeting SMEs’ demand for life-cycle financing

By: Dr. Jibao He, Head of Research Institute, Shenzhen Stock Exchange (SZSE) Jun 2019

Shenzhen Stock Exchange (SZSE) has developed a comprehensive market service system to fulfil the financing needs of SMEs at every stage of their business life cycle. SZSE operates a multi-tiered capital market consisting of the Main Board, the SME Board and the ChiNext Market along with an efficient fixed-income market. Issuers that meet the listing criteria may choose a market section in line with their business characteristics and positioning. After listing, companies may continue to expand their business through refinancing and M&A. Fixed-income instruments offer an appropriate financing channel for growth enterprises. For companies at an earlier stage of development, SZSE has established a Training Centre for Venture Enterprises, launched the V-Next Platform in cooperation with Torch Centre of Ministry of Science and Technology, invested in 11 regional OTC Markets, and initiated the Venture Capital Alliance. Working in unison with multiple parties with diverse resources, SZSE jointly provides services such as incubation, training, investment facilitation and pitching roadshows for start-up enterprises. The platform assists start-ups in standardising business operations, and accessing PE/VC investment at early stages.

To support enterprises in meeting challenges that may arise during the process of financing and accessing the capital market, SZSE has established a multi-tiered outreach program comprising of the headquarters, regional service hubs and frontline promotion centers, providing tailor-made services for different municipalities. Additionally, through the model of “robust back office plus agile front offices”, localised timely outreach services to promote listing can now be delivered efficiently.

Thus far, companies on the SME Board and ChiNext Market have raised a total amount of RMB 1.01 trillion (USD 146.3 billion) [1] through IPO and RMB 3.22 trillion (USD 466.7 billion) through equity and debt financing. The V-Next platform has facilitated financing of more than 1,000 companies, with a total of more than RMB 30 billion (USD 4.35 billion). SZSE has evolved into a powerhouse where new economy companies cluster, and into an ideal marketplace for technological, innovative enterprises. SZSE is striving to achieve its goal of “becoming a world-leading capital formation center for innovation”.  

 [1] Reference exchange rate: 1 USD= 6.8992 RMB (as of May 2019)