China's securities regulator has delayed indefinitely the creation of a planned stock market for new, small companies, according to the official China Daily newspaper, adding more uncertainty to Chinese high-tech startups' search for capital.
The establishment of a "second board," which would supplement the country's current exchange by providing a place for startups that lack an established track record, has been put off for further preparation, Zhou Xiaochuan, chairman of the China Securities Regulatory Commission, said according to an article in Wednesday's edition of China Daily. Zhou said the commission will set up the exchange at the proper time but has not set a timetable for establishment of the second board, according to the report.
The emerging instability in the world economy and the current level of risk in high-tech industries led the regulatory body to question whether China was ready to launch a second board, the report cited Zhou as saying. He made the comments to reporters during the ongoing session here of the Ninth National People's Congress, the paper reported.
Some industry observers had high expectations for the board to be set up this year.
The exchange would be located in Shenzhen, a Special Economic Zone of China near Hong Kong that has become one of China's major centers of high-tech development. Like Hong Kong's Growth Enterprise Market (GEM), established in November 1999, China's second board would be intended primarily for high-tech startups. The GEM allowed many Hong Kong dot-com companies to raise capital through initial public offerings. However, after it soared in the early months of 2000, the GEM Index plummeted as many local Internet startups failed to deliver expected results. It still is at less than half its 52-week high.
The indefinite delay surprised one Beijing-based industry analyst, who said Chinese high-tech ventures could be starved for capital until the exchange opens.
"They have no chance to get funding. Their only chance is on the second board," said Pindar Xie, an analyst at International Data Corp., in Beijing.