Annual performance of the ChiNext on the SZSE in China 2010-2023

In December 2023, the ChiNext Price Index of the Shenzhen Stock Exchange in China had a value of 1,891.37 points. The ChiNext Price Index summarizes the performance of the one hundred largest shares traded on the ChiNext Board of the Shenzhen Stock Exchange. Almost 70 percent of companies listed were in the manufacturing industry, followed by the IT sector which represented around 18 percent of enterprises.

The Chinese NASDAQ

The Shenzhen Stock Exchange has three market tiers, the Main Board, the SME-Board, and ChiNext. The Main Board is home to large companies like Ping An Bank, BOE Technology, and Yanjing Beer. The SME-Board was designated for small and medium-sized enterprises that had consolidated their market position and had stable profitability. In contrast to that, The ChiNext Board’s purpose was to provide access to capital for young, innovative companies. That is why ChiNext’s regulations and standards are more lenient than the other markets. For instance, companies do not have to be profitable to be listed and IPO-listings do not require approval by regulators but instead followed a registration-style approval process. In this regard, ChiNext is very similar to the NASDAQ or its Chinese counterpart the Star Market at the stock market in Shanghai.

Bringing Chinese Unicorns home

Deregulation of the stock market was part of a broader strategy to make domestic capital more attractive to Chinese companies. The primary source of financing for many companies in China is through banks, which are notoriously cautious of young, privately-owned companies. At the same time, China is home to some of the world’s largest and most valuable technology companies. However, many Chinese companies decide to go public in the United States instead of their homeland, like Alibaba Group, Baidu, and JD.com. Hence, the Chinese government has been willing to give up some market control in return for a higher appeal of the domestic capital markets for home-grown start-ups. The Shanghainese equivalent Star Market was rumored to attract the IPOs of tech-unicorns ByteDance, maker of TikTok, and the “most-valuable” start-up DiDi Chuxing. ChiNext, however, had not yet been able to deliver comparable results.