19 ASIAN LEGAL BUSINESS CHINA • 亚洲法律杂志-中国版 WWW.LEGALBUSINESSONLINE.COM/CHINA on the STAR Market has reached 70 percent of the market total, with five out of the top ten IPOs all taking place on the STAR Market.” “In terms of industries, overall, highend manufacturing, 5G, new energy vehicles, integrated circuits, semiconductors, high-end materials and biopharmaceuticals still occupy the main market for IPOs. Even within traditional manufacturing, sectors undergoing transformation and upgrading, such as high-end manufacturing and chemical raw materials processing, are the ones that have raised relatively large amount of money,” says Xu. STILL ADAPTING The rare occurrence of zero IPO applications mentioned above has stirred plenty of market speculation, which, coupled with subdued results of regulatory stimuluses, have again shaken market confidence. Faced with recent drastic policy changes on the A-share market, Xu says that this is in fact a reflection that market players, regulators and other parties are still finding their feet under the registration-based IPO system, and therefore one should view some of the happenings on the market rationally and have more patience and confidence in the market. “Supply and output on the securities market are always dynamic,” says Xu. “During the ‘window of opportunity’ at the beginning of the year, the market had higher expectations for, or rather some misunderstanding of, the registrationbased IPO system. Some issuers thought that the registration-based IPO system would simply make it easier for them to go public. As a result, more Chinese companies wanted to get listed on the capital markets, significantly increasing supply.” At the same time, “regulators are stepping on the brakes, hoping to find out what best suits the Chinese capital markets in the present stage. The alignment between the two sides is far from over and has in fact entered a stage of ‘tussle.’ For regulators, they hope to meet the financing needs of enterprises, and but also demand no mistake. Incidents of financial fraud by STAR Market-listed Amethystum and Sino-Essence have given regulators a serious reminder – if fraud still existed in such a strict market environment and under such stringent issuance requirements, regulation will inevitably need to be tightened. In addition, stock exchanges and the China Securities Regulatory Commission (CSRC) are also adapting to the new system, and the implementation of the registration-based IPO system also requires trial and error.” Further, Xu believes that the recent perceived “tightening of IPO review” is also attributable to objective reasons. “Due to the pandemic and the weakerthan-expected economic recovery, the actual performance of some companies has fallen below what is disclosed in the statements and performance sections in their IPO applications to the point where they could not meet, or only barely meet, the new listing standards. Such companies will definitely not see their IPO applications approved.” “The A-share market has been extremely active in the past few years, with around 500 IPOs each year. In fact, there is a ceiling to the supply of top enterprises on the market. In other words, it is impossible to generate so many quality enterprises every year. Therefore, it is very necessary for us to lower expectations for the next few years,” admits Xu. LEGAL WORK As the market and the new registrationbased IPO system continue to align with each other, there have also been significant changes in lawyers’ work and the challenges lawyers face this year. “On February 17, the CSRC promulgated relevant rules to fully implement the registration-based IPO system. At CAPITAL MARKETS
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