Xi Jinping’s hope: Science and Technology board draws on Nasdaq

The Shanghai Stock Exchange released a message on Friday (5th) that the first 25 companies of the Science and Technology Board will be officially listed on July 22. It took only less than 9 months for the official board to officially launch the market transaction. The reason why the science and technology board can be quickly reached is inseparable from the high-level CCP’s emphasis on the science and technology board.

The concept of the science and technology board was proposed by Xi Jinping at the opening ceremony of the first China International Import Expo on November 5, 2018, in order to solve the problem of mismatch between supply and demand in the capital market. In the collective study held by the Political Bureau of the CPC Central Committee on February 22, Xi Jinping further proposed the “structural reform of the financial supply side”, which provided theoretical support for the establishment of the science and technology board.

For the financing difficulties faced by China’s industrial upgrading and technological innovation, the direct financing ratio of exchanges with higher capital operation efficiency is lower, and the financing is more difficult, and supply-side reform is urgently needed. To this end, China has “taken the Bible” from the United States and imitated the Nasdaq (NASDAQ) to launch the science and technology board.

Born by technology, serving science and technology

As a “teacher” of the science and technology board, Nasdaq is born of technology and is also destined to be a technology service. NASDAQ is the acronym for the American Securities Dealers Association’s automated quotation system, which officially began operations on February 8, 1971 and is the world’s first electronic stock exchange. Although the Nasdaq, which was just founded, is only an OTC market, it provides an important financing platform for science and technology enterprises that are in urgent need of financing.

For example, chip giant Intel (Intel) is in urgent need of financing when it just leaves Fairchild Semiconductor, but it does not reach the listing threshold of mainstream exchanges. On October 13, 1971, Intel chose to list on NASDAQ and successfully raised $82.25 million. Companies with similar experiences also have AMD, a chip maker listed on NASDAQ in 1972. Of course, at the time, Intel and AMD were just humble start-ups, and it was Nasdaq’s more inclusive listing environment that gave such science and technology companies the opportunity to grow and develop.

The development of Nasdaq began in 1980. In that year, Apple, the first US personal computer company, landed on Nasdaq and issued 4.6 million shares for $22. Apple’s stock was hailed by the capital market once it was issued, and it closed at $29 on the day of the issue, creating four billionaires including Steven Jobs. Since then, Nasdaq has been awarded the title of “Billionaire Hotbed” and has become the market of choice for technology companies.

Nasdaq boosts the US information revolution

Unlike the industrial revolution, the information revolution of the 20th century was almost driven by the United States alone. In 1971, the world’s first microcomputer with a large-scale integrated circuit as a chip was made in the United States; in 1976, Apple introduced the first personal computer; in 1989, the Internet (Internet) born out of the US military network was officially named. 300,000 computers were connected to the Internet; in 1993, the United States launched the information industry development strategy, the “Information Highway” program, and the foundation of the Internet era has since been laid.

Behind the outbreak of the information revolution in the United States is the development of various science and technology enterprises in the United States, and Nasdaq is a breeding ground for capital in these science and technology enterprises. In 1986, software giants Microsoft and Oracle were listed on NASDAQ; in 1990, communications equipment giant Cisco was listed; in 1997, e-commerce giant Amazon was listed. American hardware and software companies have grown rapidly after listing and financing, and have become an important support for building information networks.

At the beginning of the 21st century, the US stock market experienced a connected bubble, and the Nasdaq index fell more than 50% between 2000 and 2003. However, the influx of capital into science and technology enterprises helped the United States take the lead in realizing the information revolution and took the lead. After the Internet bubble dissipated, Nasdaq was still the first choice for Internet companies, and Netflix, Google, and Facebook were listed on NASDAQ. Today, NASDAQ has become the world’s second largest stock exchange (in terms of market capitalization), second only to the New York Stock Exchange.

China’s technological innovation lacks a hotbed of capital

In China, science and technology enterprises have relatively poor profitability due to large R&D expenditures in the early stage. After multiple rounds of financing, the shareholding structure is more complicated, so it is often impossible to list and raise funds in the A-share market. In addition, start-up technology companies generally come from venture capital, and initial public offerings (IPOs) are the most important exit channel for venture capital. The lack of A-share listing financing platform has led to a large number of Chinese science and technology enterprises to choose to list on NASDAQ in the United States, including Baidu, Sina, Sohu, Netease and other Chinese Internet leading companies.

Therefore, China’s science and technology enterprises are in urgent need of a listed financing platform similar to Nasdaq, and the science and technology board came into being under such circumstances. Different from the A-share main board market and the GEM market, the company will make more appropriate differentiation arrangements in terms of profitability and shareholding structure, and enhance the inclusiveness and adaptability to science and technology enterprises. The foundation of Kechuang board not only provides financing channels for science and technology enterprises, but also provides an exit channel for venture capital funds, and can also retain the dividend of economic development in the Chinese capital market.

According to a study by the Organisation for Economic Co-operation (OECD), more than 50% of its major member countries’ gross domestic product (GDP) is a “new economy” based on information and knowledge. The economist Joseph Schumpeter in the book “Economic Development Theory” regards innovation (including scientific and technological innovation) as the driving force of economic development, and entrepreneurs’ innovation activities depend on the services provided by the financial system.

The development of science and technology is inseparable from the investment of capital. Nasdaq has helped the United States to stand out in the information revolution. In Xi Jinping’s “five modernizations”, scientific and technological modernization is still the top priority, and the science and technology board will become a hotbed of capital to help China’s science and technology modernization.