China plans to resume initial public offerings (IPOs) for unprofitable startups on its technology-focused stock exchanges.

This decision, announced by Wu Qing, chairman of the China Securities Regulatory Commission (CSRC), aims to boost technological independence and ease IPO market restrictions.

At the Lujiazui Forum in Shanghai on June 18, 2025, Wu said that pre-profit companies can once again list on the Shanghai Stock Exchange’s Science and Technology Innovation Board (Star Market).

The relaxed rules will also apply to Shenzhen’s ChiNext board, which focuses on smaller firms.

This policy change follows two years of tightened IPO approvals aimed at stabilizing China’s stock market by limiting equity supplies. The shift is intended to support startups as Beijing seeks to decrease reliance on foreign technology.

Trading on the Star Market began in 2019 and currently includes 588 companies with a total market value of 6.74 trillion yuan (US$937.9 billion), according to the Shanghai Stock Exchange.

Notable firms on the board include Semiconductor Manufacturing International and AI chipmaker Cambricon Technologies.

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🔗 Source: South China Morning Post

🧠 Food for thought

1️⃣ China’s IPO policy shift reflects strategic technology ambitions amid US restrictions

China’s decision to resume listings for unprofitable startups comes amid its intensified push for technological self-sufficiency in response to US restrictions.

The timing is significant as US-China tensions have prompted Beijing to accelerate its tech indigenization efforts, with American export controls and investment restrictions serving as catalysts for China’s self-reliance strategy 1.

This policy shift supports China’s “Made in China 2025” initiative, which aims to establish leadership in critical sectors including information technology and robotics through significant government investment 1.

The STAR Market, established in 2019 after President Xi’s directive, was specifically designed to serve as China’s answer to Nasdaq, a platform to nurture domestic tech champions that could reduce China’s dependence on foreign technology.

By reopening funding channels for pre-profit tech firms, China is addressing a key vulnerability highlighted during the ongoing trade tensions: the need to develop homegrown alternatives to US technology 2.

2️⃣ CSRC’s regulatory pendulum swing reveals the balancing act between market stability and innovation funding

The China Securities Regulatory Commission’s surprise relaxation comes after a period of tightened IPO approvals aimed at supporting the struggling stock market by reducing equity supply.

This latest policy reversal fits a pattern of CSRC interventions that have historically created market volatility, such as the poorly executed circuit-breaker rules in 2016 that triggered a 21% drop in the Shanghai Stock Exchange Composite Index 3.

The CSRC has struggled to balance political directives with market stability, with previous crackdowns on margin trading and public criticisms of insurance company acquisitions having triggered significant market sell-offs 3.

While stricter IPO controls may have temporarily supported stock prices, they created a bottleneck for innovation funding, as demonstrated in early 2017 when over 600 companies were waiting to go public 3.

The regulatory shift acknowledges a critical reality: that early-stage innovation companies often require public market funding before profitability, a recognition that aligns with CSRC Chairman Wu Qing’s statement that “innovation requires alliance among scientists, entrepreneurs and investors.”

3️⃣ China’s approach mirrors global patterns in funding pre-profit innovation

By resuming unprofitable startup listings, China is aligning with international market practices that recognize the extended pre-profit phase of technology companies, particularly in emerging sectors.

This approach parallels trends seen in other markets, where regulatory compliance costs like those imposed by the Sarbanes-Oxley Act have made it challenging for smaller companies to go public, leading to a 50% decline in IPOs in the US since 1996 4.

The policy change addresses a critical funding gap for innovation: globally, small-cap IPOs (companies with less than $50M in revenue) have declined significantly, reducing access to capital for emerging tech companies 4.

China’s experience with cross-border listings offers a cautionary tale—between 2011 and 2012, over 100 Chinese companies listed overseas collapsed due to fraud, resulting in losses exceeding $40 billion and significant damage to investor confidence 5.

The resumption of pre-profit listings on domestic exchanges like the STAR Market (which already has 588 companies with a combined market value of 6.74 trillion yuan) demonstrates China’s commitment to building robust local capital markets that can nurture its technological ambitions while maintaining appropriate oversight.

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