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China Set up the Beijing Stock Exchange

On September 2, at the Global Trade in Services Summit of the 2021 China International Fair for Trade in Services , Xi Jinping gave a video speech and announced that China would set up its third national stock exchange: The Beijing Stock Exchange.

The exchange was then registered on September 3, with registered capital of 1 billion yuan (US $150 million) and a location on the Financial Street in Beijing. The official position is that while the Shanghai Stock Exchange focuses on established companies and the Shenzhen Stock Exchange focuses on high-tech companies, the Beijing Stock Exchange will serve the small companies.

China started a National Small and Medium Enterprise Stock Transfer System (NSMESTS) in 2013, to let investors trade different small companies. The system enlisted over 7,000 companies in three classifications: basic, innovative, and selective. The selective class is the elite class, with 66 companies and 3.8 billion yuan in trading volume – 65 percent of the total NSMESTS trading volume. China’s Securities and Futures Commission stated that the selective class companies will serve as the foundation for the Beijing Stock Exchange.

An Epoch Times report stated that though the majority of companies on the NSMESTS are privately owned, many of the elite companies (those in the selective class) have state money. One report indicated that out of what was then 52 selective class companies, 33 had state-owned investments among their top ten shareholders. So it is yet to be seen whether the Beijing Stock Exchange is to help raise money for the privately owned small companies or the state-invested small companies.

The article also suggested that Beijing’s current policy is to squeeze money out of its already-too-dangerous real estate bubble and channel it into other capital investments. The Beijing Stock Exchange serves as one option. Beijing wants to make this capital move before the U.S. ends its quantitative easing policy. Afterward, if the Federal Reserve increases the interest rate, money may flow back to the U.S.

1. SINA, September 5, 2021
2. Epoch Times, September 7, 2021