A Reuters columnist describes the potential pitfalls of China’s planned stock market exchange:
China hopes a new stock exchange, an incubator for start-up companies, will transform the nation into a global technology heavyweight after it is launched this year. But Beijing may have another thing coming.
Intellectual property protections lack teeth and stifle innovation while inconsistent regulations don’t do enough to prevent fraud. What’s more, investors are already choking on a flood of new share offers that helped push China’s share index down 34 percent in the first quarter this year.
A start-up market, which could be launched later this year, would provide a much-needed venue for China’s small enterprises, which have been largely shut out of traditional funding sources such as banks and the main stock market.
But a second board, instead of attracting up-from-the-ground technology companies, is likely to be dominated by firms from traditional industries. Most Chinese companies still compete on cost, and few can afford to invest in cutting-edge technology.
