I. Preparations: Beginning

The Chinese economy started to enter into the transformation period at the end of the 1990s. Cultivating and strengthening emerging industries, promoting industrial transformation and upgrading and adjusting the economic structure became important drivers of sustainable development. A number of innovation-oriented and growth technology enterprises grew rapidly and were in dire need of the support from the capital market. The State Council decided to set up the ChiNext Board as early as in 2000. By 30 October 2009, 28 companies became the first to officially appear on the ChiNext Board. After a decade’s elaborate preparations, the ChiNext Board, which saw it as its mission to serve innovation-oriented and growth enterprises, set sail, becoming another milestone in the reform and development course of the Chinese capital market.

After the ChiNext Board was launched, differentiated offering and listing conditions enhanced the capital market’s direct financing function in serving innovation-oriented enterprises and startups, which facilitated the rapid development of innovation-oriented enterprises and startups and simulated economic development vitality. Data shows that financial, real estate, energy and other traditional manufacturing industries dominated the A-share market in 2009. On 30 October 2019, the proportion of SZSE-listed companies in strategic emerging industries rose to 45%. Biomedicine, electronics and computer industry became the top three industries by market capitalization. The profound changes in the industry structure show that the ChiNext Board has become an important force in supporting innovation, entrepreneurship and economic transformation.

II. Cultivation: Steady Growth

Market scale grew steadily, and technological innovation-based enterprises were gathered. From 2009 to 2019, the ChiNext Board has become an important platform that serves enterprises in technological innovation and strategic emerging industries. As of 30 October 2019, there were 776 companies listed on ChiNext, accounting for 20.96% of the total number of A-share listed companies, and their total market capitalization was CNY5.71 trillion, accounting for 10% of the total market capitalization of A-share listed companies. Over ninety percent of those companies are high-tech companies, and over seventy percent are companies in strategic emerging industries, demonstrating a significant aggregation effect among industries represented by new-generation information technology, biomedicine and new materials. The IPO financing of ChiNext-listed companies totaled CNY405.3 billion, the refinancing CNY343.7 billion and the total equity financing CNY749 billion, demonstrating ChiNext’s significant role in financially supporting the real economy. In the past decade, ChiNext-listed companies were deeply engaged in frontier domains, with an annual average R&D intensity of over 5%, and they had over 35,000 patents for invention. Among them, 103 companies once won National Award for Science and Technology Progress, and 117 companies had National Key Science & Technology Projects. They continued to accelerate the transformation of technological results, becoming important implementers of the national innovation-driven development strategy.

Fundamentals maintained stable and the foundation for long-term development was solid. From 2009 to 2016, the compound annual growth rates of the average operating income and average net profit of ChiNext-listed companies were 23% and 15% respectively, far higher than those of other boards in the corresponding period. From 2017 to 2018, affected by multiple factors, ChiNext-listed companies, featured by “technology, small and medium size and private operation”, were faced with pressure in performance growth. However, the board still developed with sufficient driving power, which saw continued growth in average income scale. In the first half of 2019, ChiNext-listed companies registered significant improvement in performance, with earnings rising sharply quarter on quarter in Q1 and Q2. Nearly ninety percent of the companies achieved profitability, with a gross profit margin of around 30%, maintaining a good growth trend.

Quality innovation-oriented enterprises were gathered, and the market structure continued to improve. In the past decade, the ChiNext Board has gathered a number of quality listed companies, which have constituted the foundation for the steady development of the board. As of 30 October 2019, five ChiNext-listed companies had market capitalization of over CNY100 billion, 24 over CNY30 billion. Mindray, CATL, Aier, Zhifei, and Lepu Medical have become benchmarking enterprises of the ChiNext Board. In 2009, no company on the ChiNext Board had annual income of over CNY3 billion or net profit of over CNY500 million. After a decade’s development, in 2018, the number of companies on ChiNext with annual income of over CNY3 billion was 93 and that of companies with net profit of over CNY500 million was 45. The quality of listed companies continued to improve.

M&As and restructurings served supply side reform and helped promote economic transformation and upgrading. The ChiNext Board gave full play to its platform advantages. While supporting listed companies in digging deep into their main business, the ChiNext Board facilitated industrial integration, transformation and upgrading through M&As and restructurings, achieving leapfrog development. As of 30 October 2019, ChiNext-listed companies completed a total of 418 major assets restructurings, with a transaction amount of CNY384.5 billion, of which industrial integration-oriented M&As accounted for over seventy percent, while underlying assets involved in the restructurings were mainly from emerging industries such as computer and communication equipment manufacturing industry, software and information technology industry, special-purpose equipment manufacturing industry, pharmaceutical industry and special technological service industry, which are in line with the national economic transformation and upgrading direction and have effectively promoted supply-side structural reform.

The investor suitability system produced a marked effect, ensuring stable market operation. Since the ChiNext Board was rolled out, the investor suitability system has been established and strictly implemented, which is an effective exploration and the first institutional arrangement on investor suitability management in the exchange market. With the strict implementation and hard work of all parties in the market, the system has achieved excellent results. Concepts like “Buyer beware, sellers bear”, “Provide suitable products to suitable investors” are deeply rooted among people, the investor structure of the ChiNext Board is significantly improved, and investors’ overall risk awareness is enhanced. Data shows that the ChiNext Board has about 50 million accounts, accounting for about thirty percent of the total number of individual accounts of SZSE; the average trading experience of ChiNext accounts is 8.95 years, longer than the 4.77 years of the individual accounts of SZSE on average; the average asset amount is over CNY 500,000, far greater than the average asset scale of individual accounts of SZSE.

Market transactions were active, and investors got good return. In the first ten months of 2019, the daily average turnover rate on the ChiNext market was 2.85% and the total trading volume was CNY 18.8 trillion, accounting for 17.6% of the trading volume of the A-share market. The ChiNext investor structure was upgraded. The proportion of institutional investors rose steadily, and the share with circulation market value increased from 3.56% at the end of 2009 to 38.44%, showing the market’s recognition of the development of the ChiNext Board and its confidence in the outlook of enterprises listed thereon. The degree of internationalization of the ChiNext Board improved. 159 companies were included as underlying stocks in the Shenzhen-Hong Kong Stock Connect, 30 as constituent stocks in MSCI index and 140 as constituent stocks in FTSE Russell global index, allowing more international investors to share growth dividend. In the past decade, the dividend of ChiNext-listed companies amounted to over CNY100 billion, accounting for 26% of the accumulated net profit they realized. The stock prices of nearly ninety percent of the companies are higher than their offering prices after rehabilitation, and sixty percent saw a growth of over 100%, actively giving back to investors.

III. Growth: Innovation

The ChiNext Board supported innovation and facilitated the formation of a virtuous circle of innovation and capital. In August 2000, the State Council officially approved SZSE to prepare the ChiNext Board. In that year only, 102 new venture capital institutions were established. A group of venture capital institutions including SCGC, Fortune Capital and Cowin Capital started in Shenzhen. The two decades during which the ChiNext Board was prepared and developed rapidly also saw the vigorous development of the Chinese venture industry. The AUM of Chinese venture capital institutions increased significantly from CNY160.5 billion at the end of 2009 to CNY2.4 trillion at the end of 2018, ranking 2^nd in the world. According to statistics, sixty percent of ChiNext-listed companies received support from venture capital before listing, obtaining a total of CNY38.2 billion investments. If it is simulated and calculated based on the current share price, the appreciation on initial investments is up to 15 times. The development of the ChiNext Board market has provided an important exit channel for venture capital and energized and expanded the venture capital market, forming a virtuous circle of innovation and capital.

The ChiNext Board stimulated innovation and cultivated a social environment for innovation-driven development. The ChiNext Board has attracted a number of high-level entrepreneurs and stimulated public enthusiasm to start new businesses, forming a strong bond between capital and talents and strengthening the social foundation that supports innovation-driven development. With a number of startups and innovation-oriented enterprises getting listed on the ChiNext Board, more high-level talents and technical talents are being motivated to join the tide of innovation and entrepreneurship. The actual controllers of 139 ChiNext-listed companies once worked in universities or scientific research institutes. The ChiNext Board has gathered 76 national-level “Thousand Talents Program” talents, 85 provincial-level “Thousand Talents Program” experts, and a number of domestic and foreign academic pacesetters. ChiNext-listed companies actively implemented stock ownership incentive plan and employee stock ownership plan and continued to improve the science & technology talent incentive mechanism, which covered over 110,000 employees. Such plans and mechanism have played an important role in stimulating employees’ enthusiasm to make innovations and start new businesses and attracting and retaining excellent talents and have significantly enhanced technological innovation talents’ sense of achievement and satisfaction.

The ChiNext Board led innovation and promoted reform and innovation of basic system. The ChiNext Board, as a test field of reform and innovation of the capital market, conducted a series of innovative explorations that match the development characteristics of innovation-oriented and growth enterprises. For IPO, the ChiNext Board lowered financial requirements, shortened earnings period, eased restrictions on the proportion of intangible assets, etc. CATL, Mindray, Pharmaron, etc. were then listed, improving the inclusiveness of the capital market. The ChiNext Board launched the “Micro Fast” private placement mechanism which allows “no sponsoring and no underwriting”, giving market players even greater autonomy. The “Micro Fast” M&A mechanism launched later is also an extension of the concept. Based on the characteristics of new economic enterprises, the ChiNext Board first launched the industry information disclosure guideline and had a system in place, which has greatly improved the effectiveness and pertinence of information disclosure and accumulated experience for the reform and development of the capital market.

IV. Development: Reform

In recent years, with a new round of scientific and technical revolution and industrial transformation sweeping the world, new technologies, new industries, new forms of business and new models have emerged constantly. Domestic and foreign stock exchanges are actively embracing the new economy. The market has raised higher requirements on the reform and development of the ChiNext Board. Since the beginning of the year, the Central Committee of the Communist Party of China and the State Council have issued Outline of Guangdong-Hong Kong-Macao Greater Bay Area Development Plan and Opinions on Supporting the Building of Shenzhen into the Pilot Demonstration Area of Socialism with Chinese Characteristics, which clearly call for all parties to “support Shenzhen in developing the capital market with SZSE at its core according to regulations and promote financial opening-up and innovation”, “improve the capability of financial institutions in serving the real economy, study and improve the offering, listing, refinancing and M&A and restructuring systems of the ChiNext Board, and create conditions to promote the reform of the registration system”. The documents have indicated the direction for the reform and development of SZSE. The China Securities Regulatory Commission (CSRC) has deployed the task of deepening the reform of the capital market on all sides and has listed the reform of the ChiNext Board among key tasks. The ChiNext Board is faced with new development opportunities.

A decade ago, the ChiNext Board was launched and grew steadily despite of wind and rain since then. In its past decade, the ChiNext Board has gathered the wisdom and efforts of market counterparts and received care and support from all sectors of society. Standing at a new starting point, SZSE will keep in mind its founding mission, follow the guidance of Xi Jinping Thought on Socialism with Chinese Characteristics for a New Era, aim to build a standard, transparent, open, dynamic, resilient capital market, adopt the unified arrangement of the CSRC, and center on the fundamental task of serving the real economy in its pursuit of high-quality development. It will adhere to the market-oriented, law-based, international direction, unswervingly deepen reform, accelerate improving the market system, product system and institutional system that are suitable for innovation-oriented and growth enterprises, and continue to enhance market competitiveness and influence, as well as expand board inclusiveness and coverage, to promote the ChiNext Board to create a strong engine for innovation capital formation. By striving to build a capital market ecosystem that matches the pilot demonstration area of socialism with Chinese characteristics, it intends to make contributions to achieving the Two Centenary Goals.