China's capital market will better serve sci-tech innovation and support new quality productive forces, following the government's latest move to promote high-quality development of the sector, experts and market insiders said.

China's top securities regulator announced on Wednesday eight new measures to further reform its Nasdaq-style Science and Technology Innovation Board (STAR) market of the Shanghai Stock Exchange.

The measures include giving priority to the listing of enterprises who have made breakthroughs in new industries, new business patterns and new technologies, according to the China Securities Regulatory Commission (CSRC).

Considering that enterprises with new quality productive forces often demand high and sustained investment and face uncertainties in research and development and commercial application, the CSRC pledged to improve institutional inclusiveness and encourage high-quality tech firms that are yet to make profits to list on the STAR market.

Speaking about the new measures at the Lujiazui Forum in Shanghai on Wednesday, CSRC Chairman Wu Qing said these measures aim to highlight the "hard-tech" characteristics of the STAR board, improve the mechanisms of issuance and underwriting, mergers and acquisitions, equity incentives and trading, and better serve sci-tech innovation and the development of new quality productive forces.

"Only by creating a favorable atmosphere that encourages innovation and tolerates failure can we promote the development of new quality productive forces," Wu said.

"These eight measures will have a very positive impact on the development of the STAR market, and the support of the capital market to sci-tech innovation," said Qiu Yong, chairman of the Shanghai Stock Exchange.

Since its launch in 2019, the STAR market has become the preferred listing destination for "hard-tech" companies, namely companies in hi-tech and strategic emerging sectors such as next-generation information technology, advanced equipment, new materials, and new energy.

So far, a total of 573 companies have been listed on the STAR market, with a combined market capitalization of over 5 trillion yuan (about $702.29 billion). The total amount raised through IPOs has reached over 1 trillion yuan, said Qiu.

The measures will facilitate the development of emerging industries and enterprises of sci-tech innovation, which can bring new vitality and growth impetus to the market, said Yang Chao, a senior analyst of China Galaxy Securities.

In terms of refinancing, the newly-realeased measures relax requirements for those companies with light assets and high R&D investment, which will help them obtain market funds, Liu Zhangming, a senior researcher with Founder Securities, explained.

Liu noted that the improved inclusiveness of tech companies in these measures will boost the long-term and sound development of tech firms and further improve their financing environment and profit quality.

Aside from the eight new measures from the CSRC, the State Council General Office also released on Wednesday 17 new measures to further strengthen the role of the capital market in supporting new quality productive forces.

The measures cover five major themes, including nurturing more venture capital (VC) entities, expanding capital sources, strengthening regulatory guidance and differentiated supervision, improving exit mechanisms and optimizing the market environment.

Support will be provided to international professional investment institutions and teams to establish renminbi funds in China, and leverage their investment experience and comprehensive service advantages.

Encouraging long-term capital to flow into VC investment is essential to fostering innovation, industrial growth and financial stability. To this end, China will support insurance institutions in investing in VC funds based on market principles, according to the guideline.

The guideline provides all-around support for the healthy development of the VC market and injects confidence to the industry, according to Yingke PE.

Last year, China's VC and private equity markets saw a total of 8,322 new funds established, with the subscribed scale of new funds reaching $614.06 billion, according to a report issued by an institute under ChinaVenture.

More long-term capital will be introduced in the market to invest in small technology companies at their early development phase. This will help create a virtuous cycle among technologies, industries and finance, CSRC Chairman Wu Qing told the Lujiazui Forum. 

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