Recently, in order to thoroughly implement the guiding principles of the Central Financial Work Conference and the "Opinions of the State Council on Strengthening Regulation, Preventing Risks, and Promoting High-quality Development of the Capital Market", and under the guidance of the CSRC, SZSE has formulated and revised relevant supporting business rules. Today, SZSE publicly solicited opinions from the market on six business rules, namely, "Rules Governing the Examination of Stock Offering and Listing", "Rules Governing the Examination of Material Asset Restructuring of Listed Companies", "Measures for the Administration of Listing Examination Committee and the Review Board for Mergers, Acquisitions, and Restructurings", "Rules for Stock Listing", "Rules Governing the Share Listing on ChiNext Board" and "Listed Companies Self-Regulation Guidelines No. 18 - Share Reduction of Shareholders, Directors, Supervisors, and Senior Management". The spokesperson of SZSE answered questions from reporters on relevant issues.

I. Could you please introduce the overall situation of the formulation and revision of the business rules?

A: Since March 15, 2024, CSRC has issued policy documents such as the "Opinions on Strictly Controlling the Access to Offerings and Listing and Improving the Quality of Listed Companies at the Source (Trial)". These policy documents focus on the overall goal of accelerating the construction of a safe, standardized, transparent, open, dynamic and resilient capital market. They propose policy measures from various aspects such as offering access, continuous supervision of issuers and regulation of intermediaries to promote the improvement of the institutional mechanisms for the long-term stable development of the capital market and enhance its function. Under the overall guidance of the CSRC, SZSE studied, evaluated and refined the implementation measures in accordance with the requirements of the policy documents, and formulated and revised the relevant supporting business rules.

In this process, SZSE has adhered to the key tasks of strengthening regulation, preventing risks, and promoting high-quality development. We have implemented the regulatory requirements that are "strict and rigorous", emphasizing "strengthening market foundation" and "strict supervision and control". We have refined the rules while maintaining the overall stability of the basic systems of each business area, so as to further enhance the adaptability, effectiveness, and predictability of the system. The first is to strictly control the access. We comprehensively and strictly strengthen supervision over companies in offering and listing, highlighting the improvement of financial indicators for listing, strengthening financial authenticity review, and tightening the responsibility of intermediary institutions. The second is to enhance continuous supervision. We will impose strict constraints on cash dividends, regulate shareholders' share reduction behaviors, thereby promoting listed companies to improve investor return capabilities and levels. The third is to enhance market exit mechanism. We will strictly enforce delisting standards, eliminate unqualified companies, and ensure that "those who should be delisted are delisted" to protect the legitimate rights and interests of investors.

During the public consultation period, SZSE will gather opinions and suggestions from market participants through various means and channels. We will fully study, evaluate, and reasonably incorporate these opinions and suggestions into the relevant supporting business rules. Additionally, we will promptly formulate and revise other related business guidelines and guides. Subsequently, according to the unified arrangement of the CSRC, we will timely announce the implementation to the market.

II. Please introduce the considerations in this revision regarding optimizing listing requirements and refining the positioning requirements of boards.

A: Listing requirements and board positioning are important institutional arrangements for the capital market to serve the real economy, support technological innovation of enterprises, and promote high-quality development. In advancing the registration-based IPO reform, SZSE revised the "Rules for Stock Listing" and "Rules Governing the Share Listing on ChiNext Board". We have set up diverse listing standards, optimized the requirements, and enhanced the coverage of boards, which has played a positive role in serving the real economy through the capital market. Considering the practical needs of strictly controlling the access to offering and listing and improving the quality of listed companies from the source to effectively protect the legitimate rights and interests of small and medium-sized investors, the current listing requirements of the Main Board and the ChiNext Board are not compatible. This is mainly due to low financial indicators, with some applicant companies having small profit scales and weak risk resistance, leading to significant performance fluctuations post-listing; and other relevant indicators lack comprehensiveness in guiding enterprises to apply for appropriate boards. Based on in-depth research, SZSE has revised relevant rules to improve listing requirements and board positioning requirements, enhancing the adaptability and guiding functions.

Firstly, we have revised the listing requirements for the Main Board to enhance the capability to provide stable returns to investors. The newly revised "Rules for Stock Listing" have moderately increased the net profit, cash flow, revenue and other indicators of the first and second sets of listing standards on the Main Board. Specifically, the first set's recent three-year cumulative net profit indicator has been increased from 150 million yuan to 200 million yuan, the recent one-year net profit from 60 million yuan to 100 million yuan, the recent three-year cumulative cash flows from operating activities from 100 million yuan to 200 million yuan, and the recent three-year cumulative operating revenue from 1 billion yuan to 1.5 billion yuan. The second set's cash flow indicator has been raised from 150 million yuan to 250 million yuan, further emphasizing the Main Board's positioning as a market for large-cap blue chips, enhancing listed companies' ability to provide stable returns to investors. The estimated market capitalization and revenue indicators of the third set of the Main Board listing standards have also been moderately increased, from an estimated market capitalization of 8 billion yuan to 10 billion yuan and recent one-year operating revenue from 800 million yuan to 1 billion yuan. This will strengthen the industry representativeness and provide the market with higher quality and more diverse investment targets.

Secondly, we have revised the listing requirements for the ChiNext Board, emphasizing risk resistance and growth potential. The newly revised "Rules Governing the Share Listing on ChiNext Board" has moderately increased the net profit indicator of the first set of listing standards on the ChiNext Board. The recent two-year net profit indicator has been increased from 50 million yuan to 100 million yuan, and a new requirement for the recent one-year net profit of no less than 60 million yuan has been added, highlighting the company's risk resistance capability. The estimated market capitalization, revenue and other indicators of the second set of ChiNext Board listing standards have also been moderately increased. The estimated market capitalization indicator has been increased from 1 billion yuan to 1.5 billion yuan, and the recent one-year operating revenue from 100 million yuan to 400 million yuan. The revisions aim to support the listing of enterprises that meet the requirements of scale, industry and development stage suitable for the positioning of the ChiNext Board.

Thirdly, we have refined the board positioning and clarified market expectations. The newly revised "Rules Governing the Examination of Stock Offering and Listing" further specifies the positioning of "large-cap blue chips" of the Main Board from the dimensions such as industry status, performance scale, core technology process, industry development trend, and business stability, highlighting industry representativeness and increasing technology elements. It explicitly requires issuers and sponsors to evaluate and judge the positioning of the Main Board. At the same time, the relevant requirements for the positioning of the ChiNext Board will be improved simultaneously, and the logic and standards of the "three innovative" and "four new" of the ChiNext Board will be clarified further from the requirements of promoting the development of new-quality productive forces, and the relevant indicators reflecting the growth of innovative enterprises will be moderately improved.

This time, the conditions for implementing restructuring and listing for companies listed on the Main Board and ChiNext Board in the "Rules Governing the Examination of Material Asset Restructuring of Listed Companies" have also been revised simultaneously, so as to further strengthen the supervision of restructuring and listing and reduce the value of "shell resources".

III. How does this revision further tighten the "access" control through stricter examination mechanisms and processes?

A: Strictly controlling the "access" to IPO and improving the quality of listed companies from the source are realistic needs to better protect the interests of investors and enhance the inherent stability of the capital market. Highlighting "strengthening market foundation" and "strict supervision and control", SZSE has revised the "Rules Governing the Examination of Stock Offering and Listing" and the "Rules Governing the Examination of Material Asset Restructuring of Listed Companies" based on the practical experience of IPO examination. The revisions focus on strengthening the guarantee through the examination mechanism and process, solidifying the responsibilities of all parties.

The first is to reinforce the responsibilities of issuers and "key minorities". Firstly, the quality requirements for information disclosure are further clarified. Issuers must accurately and truthfully reflect the companies' business capabilities. Secondly, the regulation on operational practices is to be specifically reinforced. The issuer's controlling shareholders, de facto controllers, directors, supervisors, senior management, together often being referred to as the "key minorities", shall enhance their commitment to integrity, self-discipline, and adherence to legal principles, improve corporate governance and strengthen internal control systems. Thirdly, strict requirements on the application interval are introduced. Based on the existing cases of rejected applications twice within one year, new provisions have been introduced such as "automatic withdrawal upon inspection" and "automatic withdrawal upon supervision," to target the companies that might attempt to enter the market despite existing issues.

The second is to reinforce the responsibilities of intermediaries as "gatekeepers". Firstly, it further clarifies the requirements for intermediaries to fully utilize capital flow verification, customer and supplier penetration verification, and on-site verification to ensure that financial data is consistent with actual business operations, effectively preventing financial fraud. Secondly, the supervision over intermediaries is strengthened, expanding the grounds for penalizing intermediaries that organize, direct, or cooperate with issuers in engaging in illegal activities.

The third is to enrich the specific measures for examination and strict control. Firstly, if there are obvious flaws in the quality of information disclosure that seriously affect investors' understanding or the exchange's examination, or if the issuer does not comply with national industrial policies or board positioning, SZSE may directly terminate the examination in accordance with the regulations. Secondly, the principle of "comprehensive supervision" is clarified, intensifying on-site supervision efforts. The scope of on-site supervision is expanded to include that if significant events occur after the offering and listing application is reviewed by the Listing Committee, on-site supervision may be carried out as needed. Thirdly, the regulatory requirements that are "strict and rigorous" are implemented, increasing the intensity of self-regulatory disciplinary measures such as disciplinary sanctions.

The fourth is to further improve the quality and efficiency of M&A restructuring. Firstly, the scope of "small-sum rapid" examination mechanism for ChiNext Board is to be moderately expanded, allowing supporting financing to be used for paying the cash consideration of the transaction. The supporting financing amount is optimized to "not exceeding 10% of the listed company's audited net assets at the end of the most recent year", to support listed companies in enhancing investment value through mergers, acquisitions and restructuring. Secondly, the "small-sum rapid" examination period is shortened to 20 working days to set clear market expectations. Thirdly, support is provided for mergers and acquisitions between listed companies. It is made clear that entities receiving shares in a merger that do not meet the requirements of investor suitability management can continue to hold or sell the shares in accordance with regulations.

IV. Please describe how, in this revision, the operational mechanisms of the Listing Committee and the Review Board have been improved to further strengthen the prevention and control of integrity risks.

A: SZSE attaches great importance to the integrity supervision and consciously accepts the supervision and inspection of CSRC on our review work. We willingly accept the supervision from the Discipline Inspection and Supervision Group stationed at the CSRC by the CCDI and works closely with the Group, continuously improving the mechanisms for monitoring and restricting the powers of the offering and listing examination process. We also intensify supervision and management of key personnel, positions and stages, strengthen the risk prevention and control of integrity risks through targeted institutional arrangements and measures, embedding supervision requirements into the whole process and all aspects of the offering and listing examination.

The revision of the "Measures for the Administration of Listing Examination Committee and the Review Board for M&A Restructurings" aims to strictly enforce the review responsibilities of both committees, strengthen regulatory accountability, and further improve the transparency of reviews. It strictly strengthens the management and supervision of committee members and team development to better leverage the checking and balancing roles of the Listing Committee and the Review Board.

The first is to strengthen the performance of duties by the two committees. The Listing Committee and the Review Board are required to strictly enforce their review responsibilities, adhere rigorously to review standards, focusing on the prevention of financial fraud and deceitful offering, and strictly control the access to offering, listing, and M&A restructuring.

The second is to improve the supervision and accountability system. The exchange is directly responsible for managing the committee members, and the discipline inspection department may conduct on-site supervision over the meetings of the Listing Committee and the Review Board. If an issuer is found to be involved in fraudulent offering and other violations of laws and regulations, and if relevant committee members intentionally or due to significant negligence violate integrity disciplines while performing their duties, they shall be held accountable for life.

The third is to optimize the review meeting mechanism. Before the review meeting of the two committees, if the participating members have doubts about important examination matters, they can hold a meeting with the review department for discussion. During the review meetings, each member shall articulate their opinions clearly, explaining the reasons and basis for their views, and the meeting convener speaks last. This highlights the collective decision-making on significant issues and further improves the transparency of reviews.

V. Please describe the institutional arrangements for regulating share reduction in this revision.

A: The rules for share reduction are an important part of the capital market and have a direct impact on market participants. In recent years, SZSE has continuously improved the system of rules for share reduction. However, some regulations have been issued in a scattered manner, such as Q&A and notices, and new situations like indirect by-passing reductions have emerged, which have attracted significant market attention. The "Opinions on Strengthening the Regulation of Listed Companies (Trial)" issued by CSRC systematically arranges the optimization and improvement of the share reduction system. SZSE has meticulously refined and implemented the document's requirements, drafted rules for share reduction to guide major shareholders, directors, supervisors, and senior executives to towards regulated, rational, and orderly reduction of their holdings.

The first is to build a "standardized and easy-to-use" system of rules for share reduction. The system involves a comprehensive revision and integration of the "Implementing Rules for the Reduction of Shares by Shareholders, Directors, Supervisors, and Senior Management of Listed Companies" along with related FAQs and notices into the "Listed Companies Self-Regulation Guidelines No. 18 - Share Reduction of Shareholders, Directors, Supervisors, and Senior Management". This initiative further establishes a unified and concise system for share reduction, thereby improving the convenience and standardization of the rules.

The second is to strengthen supervision to prevent regulatory arbitrage. Firstly, strengthening the requirements for major shareholders to reduce their holdings. The relevant requirements for share reduction by controlling shareholders and de facto controllers are reiterated. If the stock of a listed company trades below the offering price or the book value, or if the dividend is not up to standard, share lessening through the secondary market is forbidden. We’ve strengthened the identity management of major shareholders and clarifies the requirements for consolidated calculation of shares. It is specified that if shareholders and their persons acting in concert jointly hold more than 5% of the shares, the provisions on reduction of principal shareholders shall apply. If the concerted action relationship is terminated, they shall continue to jointly abide by the provisions on share reduction for principal shareholders within 6 months. Secondly, strictly preventing the use of short selling and refinancing to reduce holdings. It is clarified that principal shareholders, directors, supervisors and senior management shall not sell the company shares through short selling and shall not carry out derivative transactions with the company shares as underlying assets. Restricted shares shall not be lent through refinancing, and shareholders of restricted shares shall not sell the company shares by financing securities. Shareholders shall settle the company share short selling contracts before acquiring restricted shares. Thirdly, strengthening the regulatory requirements for agreement transfers and non-trade transfers. It is clarified that the transferee shall not reduce their holdings of the transferred shares within six months. Those who lose the identity of principal shareholder, controlling shareholder or de facto controllers due to transfer activities shall continue to comply with the relevant reduction quota, pre-disclosure and other requirements within 6 months. Fourthly, optimizing information disclosure requirements. It is clarified that directors, supervisors, senior management and principal shareholders who reduce their holdings through the secondary market shall disclose their reduction plans 15 trading days in advance, and the time interval of the reduction plan is reduced from a maximum of 6 months to 3 months. Fifthly, other matters. It has further clarified the circumstances where directors, supervisors and senior management and their persons acting in concert shall not reduce the company's shares, and specified the circumstances such as shareholders' donation of shares, subscription or purchase of ETFs, as well as the applicable requirements for companies transferred to other boards, re-listed companies and reorganized listed companies.

VI. Please briefly introduce the new changes in the cash dividend system of listed companies.

A: Cash dividends are the most direct and effective way for listed companies to return investors. To encourage listed companies to actively distribute cash dividends and further improve the sustainability and stability of dividends, SZSE has made the following optimization arrangements for the relevant provisions on dividends in the "Rules for Stock Listing" and the "Rules Governing the Share Listing on ChiNext Board".

The first is to take strong constraint measures for non-conforming dividends. Companies that have not distributed dividends for many years or have a low dividend ratio are imposed "other risk warnings" (ST). In terms of the Main Board, companies that meet the basic conditions for dividends, whose total cash dividends over the last three fiscal years are fewer than 30% of the average annual net profit and whose total dividend amount is smaller than 50 million yuan, will be subject to ST. In terms of ChiNext, considering the characteristics of different boards and company differences, the absolute standard for dividend amounts is lowered to 30 million yuan. Additionally, ChiNext companies that have invested more than 15% of their total operating revenue in R&D over the last three years or have a cumulative R&D expenditure of over 300 million yuan can be exempt from ST. The amount of share repurchase and cancellation is included in the calculation of cash dividends.

The second is to push listed companies to distribute dividends multiple times a year. Listed companies are required to comprehensively consider undistributed profits, current performance and other factors to determine the frequency of cash dividends, and increase the frequency of dividends when conditions permit to stabilize investors' expectations for dividends. The benchmark for interim dividends is further clarified to eliminate misunderstandings related to audit requirements of financial statements.

VII. Please briefly introduce the optimization and improvement of the delisting system.

A: The normalized delisting mechanism is the key to ensuring the healthy operation of the capital market. Since the reform of the delisting system in 2020, a total of 135 companies have been delisted from SZSE and SSE markets, including 112 companies that were compulsorily delisted, achieving a smooth start to normalized delisting. With profound changes in the market environment and regulatory environment, the current delisting rules need to further expand coverage and increase the intensity of clearance. Recently, the "Opinions on Strictly Implementing the Delisting System" has clearly proposed further stringent delisting standards. SZSE has resolutely implemented the requirements of relevant documents, revised and improved the "Rules for Stock Listing" and the "Rules Governing the Share Listing on ChiNext Board", so as to ensure that "those who should be delisted are delisted". The revision of the delisting rules mainly follows the following ideas.

The first is to highlight the guidance of strict regulation. Firstly, expanding the scope of compulsory delisting for serious violations, lowering the thresholds for delisting due to financial fraud in terms of years, amounts, and proportions, and adding delisting circumstances for multi-year continuous fraud. Three levels are distinguished: one year, two consecutive years, and three consecutive years and above. For one year of financial fraud, it is a falsely recorded amount of "200 million yuan, 30% proportion"; for two years, "a total of 300 million yuan, 20% proportion"; if it is found to have false records for three years or more, the company will be delisted, so as to resolutely crack down on vicious and long-term systematic financial fraud. The one-year and consecutive two-year standards apply to fraudulent record behaviors in 2024 and subsequent years; the three-year or more standard applies to fraudulent record behaviors in 2020 and subsequent years. Secondly, a new ST situation for financial fraud has been added. If the administrative penalty pre-notification shows that a company's financial accounting reports contain false records that do not meet the compulsory delisting standards for serious violations, the ST will be implemented. The company can apply for ST removal only after the retrospective adjustment of the punishment items is completed and the administrative punishment decision is made for 12 months. Thirdly, serious misappropriation of funds without rectification will be included in the compliance-related delisting category. If the balance of funds misappropriated by a company's controlling shareholder or its affiliates reaches more than 200 million yuan, or accounts for more than 30% of the company's most recent audited net assets, and is not returned within the required period, the company's stock will be delisted, effectively strengthening the regulatory deterrent against misappropriation by principal shareholders.

The second is to highlight the investment value orientation of listed companies. Firstly, strictly implementing financial delisting indicators. We raised the operating revenue indicator requirements for loss-making Main Board companies from the current "100 million yuan" to "300 million yuan" and kept the ChiNext Board's "100 million yuan" unchanged. The total profit is added to the loss examination dimension, and the delisting situation based on the audit opinion on internal control of financial reports will be introduced for financial *ST companies, intensifying the efforts to eliminate companies that lack sustainable operating capabilities. Secondly, internal control audit opinions will be included in the compliance-related delisting circumstances. Compliance-related delisting will be implemented for companies with modified internal control audit opinions for multiple years. *ST will be imposed on for companies with modified internal control audit opinions  for two consecutive years or failure to disclose internal control audit reports in accordance with regulations. In the third year, companies will be delisted if they have modified internal control audit opinions  or if they fail to disclose internal control audit reports in accordance with regulations, so as to urge companies to improve their level of standardized operations. Thirdly, guiding companies to improve internal governance. A new delisting situation is added for companies with major defects such as disorderly competition for control, to urge shareholders to resolve control disputes within the institutional framework and effectively protect the information rights of small and medium-sized investors. Fourthly, improving the trading-related delisting threshold for the Main Board and appropriately increasing the market capitalization delisting standards for Main Board A-share (including A+B shares) companies to 500 million yuan. This is aimed at increasing market-driven clearance efforts and promoting listed companies to enhance quality and investment value.

VIII. This revision involves many rule changes. What arrangements are in place for the transition period?

A: The formulation and revision of the business rules involve multiple system content optimizations and adjustments. To ensure the smooth implementation of the system and an orderly transition between old and new rules, SZSE has made the following classified arrangements for the transition period.

The first is the transitional arrangements for the adjustment of listing requirements on the Main Board and the ChiNext Board. The new rules are proposed to be implemented from the date of issuance. Pre-IPO companies on the Main Board and ChiNext Board that have not passed the examination of the Listing Committee shall be applied the newly revised listing requirements; and those that have passed the examination of the Listing Committee shall be applies the listing requirements that were in place before the revision. For companies that fail to pass the examination of the Listing Committee and do not meet the newly revised listing requirements, SZSE will guide them to re-apply for listing on other appropriate boards and ensure a smooth continuation of the examination process.

The second is the transitional arrangements for the adjustments to the strong enforcement measures on dividends. The year 2024 will be considered the first fiscal year, with the period from 2022 to 2024 serving as the most recent three fiscal years.

The third is the transitional arrangements for the adjustment to the delisting system. Firstly, the revised standards for compulsory delisting due to major illegal financial fraud will apply to listed companies that receive pre-notification of administrative penalties from the relevant regulatory authorities after the new rules come into effect. For a few companies not included in the scope of the new delisting rules and have already received a pre-notification of administrative penalty, SZSE will continue to strengthen all-round accountability such as self-discipline supervision, administrative penalties, criminal accountability and civil compensation in conjunction with regulatory authorities and judicial organs, so as to effectively increase the punishment of illegal activities of relevant entities. Secondly, for delisting due to modified opinions in internal control audit, the year 2024 will be considered the first fiscal year. Delisting due to major defects related to capital occupation and disorderly competition for control rights shall be implemented as of the date of issuance of the new rules. When the new rules are implemented, if a listed company continues to experience non-operational fund occupation by its controlling shareholders and their related parties, and if the CSRC orders rectification, which is not completed within the specified period after the new rules take effect, the new rules shall be applied to determine whether the company triggers compliance-related delisting. If the de facto controllers have changed before the implementation of the new rules and the current de facto controllers have no affiliation with the fund occupier, the original fund occupation behavior is not subject to the new rules for the compliance-related delisting. If the de facto controllers change after the implementation of the new rules, the new rules on fund occupation for compliance-related delisting will apply. Thirdly, the revised Main Board financial composite indicator of "loss + operating revenue" will take the year 2024 as the first fiscal year. After the disclosure of the 2023 annual report, listed companies will continue to implement *ST, revoke *ST, or terminate listing in accordance with the provisions of the original rules on compulsory financial related to financial status. Among them, the companies subject to *ST shall revoke *ST or terminate listing in accordance with the new rules after the disclosure of the 2024 annual report. Fourthly, the revised market capitalization delisting indicators for Main Board A-shares (including A+B shares) and depositary receipts will start counting the relevant periods six months after the issuance date of the new rules.