China to launch NASDAQ-style exchange for small companies

China has announced that it will launch a NASDAQ-style exchange for small companies on 1 May to improve the fund-raising for domestic start-ups after regulators approved listing rules for companies.

The China Security Regulatory Commission (CSRC) published on its website provisional regulations for listings on the new board and it will be independent of the existing two other major stock boards in Shanghai and Shenzhen.

The new board will mainly help the smaller-size companies with smaller assets and annual profits than those required by China's other two major stock exchanges.

Exchange officials have said that the new board will need at least eight companies to officially launch the new exchange with the requirement being an annual net income of at least 10 million yuan ($1.5 million) in the previous two years, or 5 million yuan in the most recent year with sales of at least 50 million yuan.

Company wishing to list will be required to issue shares worth at least 30 million yuan.

"The move will play an important role to attract non-government investment, help upgrade industrial structures and promote employment," a CSRC spokesman said in a statement on the agency's Web site.

Since Chinese banks support mainly large companies, Premier Wen Jiabao had said that the country should have a bourse, similar to the Nasdaq Stock Market for small companies, who can then be in a position to raise funds.

This long awaited board had been planned since 1990s, but it was delayed after the global dotcom bubble burst in 2000 and further delayed, when China's stock market plunged 65 per cent last year, due to the global economic crisis.

But according to some exchange officials, the new board may take longer to open than its scheduled date of 1 May since about half of the 20 companies selected last year to be the first to go public, were no longer eligible due to their underperformance in wake of the economic meltdown.