China's stock exchanges are known for speculative activity and the absence of a strong oversight and the country hopes to improve its reputation through the launch of a new exchange.
What Happened
China on Monday introduced its new stock exchange called "STAR Market," or the Science and Technology Innovation Board. CNBC reported the pilot program exchange kicked off with the listing of 25 companies across industries with high growth potential, most notably high-tech equipment manufacturing and biotechnology.
The new exchange is also meant to help domestic companies who operate in areas of national security raise capital.
Why It's Important
China's new exchange marks the third time in the past 10 years alone the country attempted to establish a new equity market, according to CNBC. Most recently, the New Third Board exchange was launched in 2013 but failed to gain any notable investor interest compared to the country's A-share market.
Unlike prior exchange launches, the new STAR exchange received public support from Chinese President Xi Jinping who personally announced plans for the exchange late last year. This may create a scenario where regulators and political forces might "try to influence and support (the board) to see it's a successful initiative," Andy Nybo, a financial markets researcher, told CNBC.
China's new exchange will only be available to domestic investors with assets of at least 500,000 yuan ($72,655). For the time being, foreigners have minimal opportunity to participate but should still be closely examined by global investors to get a glimpse of what China's stock markets might look like in the coming years.
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