The introduction and implementation of the rules for the System marks the basic finalization of the institutional arrangement for the System and the extension of the System to the whole A-share market and all public stock offerings, representing a milestone in the reform and development of China’s capital market. On 17 February 2023, Shenzhen Stock Exchange (“SZSE”) officially introduced 30 supporting business rules and guidelines for the implementation of the across-the-board registration-based IPO system in accordance with the overall deployment of CSRC. SZSE’s Press Secretary took up questions about market concerns.

I. Please brief us on SZSE’s solicitation and official introduction of the supporting business rules for comprehensively implementing the registration-based IPO system.

A: Among the supporting business rules introduced this time, SZSE has solicited public opinions on ten major ones concerning the reviewing of stock offering and listing of enterprises and the issuance and underwriting of stocks since 1 February 2023, and has solicited opinions synchronously from members and relevant market institutions and self-regulatory organizations on six business implementation rules concerning the real-time monitoring of abnormal stock trading on the SZSE Main Board. In the course, market parties paid close attention to and participated in such topics extensively, spoke highly of the comprehensive implementation of the System and the supporting business rules for opinions solicitation, and made helpful suggestions on the revision and improvement of the rules. The suggestion are mainly on further optimization of the review procedure, refinement of the issuance and underwriting pricing and placement system, improvement of the trading mechanism arrangement, and facilitation for intermediary institutions to fulfill their duties.

As at February 8, we received 141 suggestions on the rules from market entities. SZSE attached great importance to such suggestions, and carefully studied, classified and treated each of them.First,some suggestions were adopted in the revisions to the rules. After the solicitation, we took in 36 reasonable and feasible suggestions, and responded to the most concerns of relevant entities. To be specific, when there is a high multiple of online subscriptions in the Main Board stock offering, we optimized the issuance and underwriting pricing and placement system to continue to incline towards online investors on the whole in new share offering while appropriately lowering the offline-to-online clawback ratio in order to balance the reasonable demands of different investors. Besides, we refined the procedure and time limit requirements for the acceptance process, added the late correction process to the acceptance stage of initial offering, refinancing and restructuring applications, and extended the time limit for working paper submission from five business days to ten business days, so as to facilitate intermediary institutions’ duty performance as necessary. As for other suggestions, we will further examine the pros and cons with prudence, and evaluate the conditions and timing for implementation in a thorough manner.Second,some suggestions were adopted in practice. Quite a number of suggestions are related to joboptimization, including some on further clarifying the standard on the positioning of the Main Board, some on making review inquiries more specific, and some on promoting instant review. SZSE will adopt these suggestions, and will earnestly implement the requirements for the reform of the registration-based IPO System, improve relevant work and continuously enhance the sense of gain of all market parties in the follow-up reviewing and continuous regulation of stock issuance and listing of enterprises.

In addition to the aforesaid 16 business rules for opinion solicitation, SZSE has also introduced the other 11 business rules and three business guidelines focusing on clarifying the policies to be refined for the reviewing of stock issuance and listing of enterprises, the issuance and underwriting of stocks, the continuous regulation and the trading of stocks so as to enhance the cooperativity and operability of rules and develop a clearer, simpler and friendlier rule system. All these efforts are aimed at consolidating the institutional foundation for the smooth implementation of the reform of implementing the across-the-board registration-based IPO system. Regarding the rules introduced this time, we set a special page about the comprehensive implementation of the System on our official website so that market entities can refer to the information on the rules more conveniently.

II. Please share with us SZSE’s arrangements for the application for stock issuance and listing of enterprises on the ChiNext Board made by the not-yet-profitable enterprises.

A: According to the overall deployment of CSRC, SZSE formulated the standards and regulatory policies for the listing of not-yet-profitable enterprises on the ChiNext Board at the beginning of the ChiNext reform and the piloting of the registration-based IPO system in 2020, leaving space for the listing of not-yet-profitable enterprises. Moreover, considering the actual situation of the market and following the principle of “seeking progress while maintaining stability”, we also decided not to implement such standards and policies during the transition period at that time.

The registration-based IPO system has been piloted on the ChiNext Board for more than two years. The review of stock issuance and listing of enterprises has been pushed ahead in an orderly manner. The market operation is generally stable. And the market structure and ecology are being continuously optimized. Accordingly, the time is ripe for implementing the standards for the listing of not-yet-profitable on the ChiNext Board.First,the desire of different types of high-tech enterprises and innovative venture enterprises to develop and expand by getting listed on the ChiNext continues to grow. Many of them feature a strong innovation attribute but have not yet been profitable, and they request financing through getting listed on the ChiNext. Therefore, it is necessary to make the ChiNext Board more inclusive and cover a wider range to better serve the technology-based self-reliance.Second,the foundation for the regulation of the stock issuance and listing of not-yet-profitable enterprises is getting more and more solid. Over the past years, SZSE has been keeping improving the quality and efficiency of the review of stock issuance and listing of enterprises, enriching our experience in review and regulation, enhancing the efficiency of routine regulation of listed enterprises and securities trading, laying a solid foundation for supporting the stock issuance and listing of not-yet-profitable enterprises.

This time, SZSE releases a special notice on the application of not-yet-profitable enterprises for listing on the ChiNext Board to announce its arrangements in three aspects:First,SZSE refines the industries of not-yet-profitable enterprises, and includes innovative venture enterprises in advanced manufacturing, Internet, big data, cloud computing, artificial intelligence, biomedicine and other high-tech industries and strategic emerging industries;second,SZSE clarifies the conditions for the listing of not-yet-profitable enterprises, and put into use the listing standard that “the estimated market cap of the enterprise shall be no less than RMB5 billion and its operating income in the past year shall be no less than RMB300 million”;third,SZSE makes sure that relevant rules are harmonized and consistent, and have abolished the requirement that “red-chip enterprises and enterprises with a special equity structure that apply for listing on the ChiNext Board shall have a positive net profit in the past year” in theRules Governing the Listing of Shares on the ChiNext Board.

III. Please introduce the main content of systems for the real-time monitoring of abnormal stock trading on the Main Board.

A:To enhance the transparency of the regulation of stock trading on the Main Board in the context of the comprehensive implementation of the registration-based IPO system, maintain the stock trading order, and protect the investors’ legitimate rights and interests, theRules on the Real-time Monitoring of Abnormal Stock Trading on the Main Boardhas been formulated and released based on the experience in the pilot registration-based IPO system reform of the ChiNext Board and the regulatory practices of the trading on the Main Board. The main content includes the following three aspects:

First,the types and standards regarding abnormal trading behaviors have been specified. The definitions, composition elements, and quantitative standards regarding the five abnormal trading behaviors on the Main Board have been clarified (consistent with the ChiNext Board overall), and the requirements for the identification of abnormal trading behaviors on the Main Board and the adjustment mechanisms have been specified. The monitoring indicators for some abnormal trading behaviors, such as intra-day false declarations, have been improved, and the reverse trading circumstance has been added to the category of indicators on pushing up or driving down stock prices. By doing so, the accuracy and effectiveness of the regulation have been improved.

Second,members’ duties in the management of the trading behaviors of customers have been strengthened. Members are required to identify, manage and report abnormal trading behaviors of customers in a timely manner and to proactively cooperate and keep in alignment with SZSE in regulation, thereby maintaining the stock trading order of the Main Board. Members who fail to perform duties as required may be subject to self-regulatory measures or disciplinary punishment according to the rules.

Third,the circumstances in which self-regulatory or heavier measures can be adopted have been specified. Investors identified with abnormal trading behaviors will be subject to verbal warnings, written warnings, interviews, restrictions on trading and other self-regulatory measures. Stocks identified with serious abnormal fluctuations, risk warnings, and delisting transition will be included in the scope of key monitoring. Meanwhile, the circumstances that can be strictly identified and be subject to heavier self-regulatory measures have been clarified to avert trading risks.

IV. After the comprehensive implementation of the registration-based IPO system, what are the main differences in the offering and underwriting mechanisms for the IPO on the Main Board, compared to the pre-reform period?

A:SZSE has been adhering to the market-oriented and law-based reform and has fully drawn on the experience in the pilot registration-based IPO system reform of the ChiNext Board. SZSE has formulated theImplementation Rules for Securities Offering and Underwriting Business in Initial Public Offeringbased on the positioning characteristics and investor structure of the Main Board and considering both the main board and the ChiNext Board. SZSE has also adjusted and optimized the pricing mechanism for offering on the Main Board and placement-related mechanisms, so as to enhance the inclusiveness and adaptability of the system and further strengthen the market constraints. The main differences mainly lie in the following three aspects:

First,the pricing mechanism has been improved. SZSE has made clear that the price and volume of the stocks to be offered shall be determined in a market-oriented way. The direct pricing method has been retained, and the pricing reference cap has been added. The exclusion percentage cap for the highest offer has been adjusted, and the mechanisms for online investors to fill prices, the disclosure of offer information, the pricing reference values, and the issuance of special announcements on investment risks have been optimized. Futures companies have been included among the inquiry objects. Additionally, individual investors’ participation in the offline inquiry has been retained, and the market cap requirements for placement targets to participate in the offline offering have been clarified.

Second,the placement and restricted-offering mechanisms have been optimized. The clawback mechanism has been optimized. When the online subscription multiple is high, the offline-to-online clawback ratio will be appropriately adjusted. The strategic placement volume and the number of investor participants will be specified according to the difference in the number of stocks to be offered. A restriction has been put on sales for a certain proportion of shares offered offline. The differentiated offline restricted-offering ratio requirement for large-cap stocks has been specified.

Third,the risk prevention mechanism has been strengthened. The implementation mechanism for the over-placement option has been improved to appropriately increase the flexibility of the operation. The new response mechanisms regarding the margin payment by offline investors and secondary placement in case of major market changes have been introduced.

V. Please introduce the relevant work transition arrangements after the supporting rules are officially released and implemented.

A:The comprehensive implementation of the registration-based IPO system has involved the formulation and revision of many rules and many market participants. Additionally, it has a big market effect. To ensure the transition between the old and new rules and between the business and the smooth implementation of the reform, SZSE has made specific arrangements for the transition between the relevant business and between the rules.

First,regarding the time of the application acceptance by the Main Board. SZSE will accept the applications submitted by enterprises under review by CSRC Shenzhen regarding the Main Board IPO, refinancing, and merger and restructuring from 20 February to 3 March 2023. SZSE will begin to accept the new applications on the Main Board from enterprises from 4 March 2023.

Second,regarding the requirements on the ChiNext Board for document review. The application acceptance and review work of the ChiNext Board are in smooth progress. At the same time, enterprises under review should submit special explanation and review opinions in compliance with the new rules by 10 March 2023, and submit the updated application documents when replying to inquiries or updating the financial statements next time.

Third,regarding the arrangements for the transition period of the offering and underwriting. As from 17 February 2023, where the enterprises on the Main Board regarding the initial public offering of securities obtain the registration approval and have not started the offering, where the enterprises on the ChiNext Board offer securities for the first time, or where the listed enterprises on the Main Board and ChiNext Board are about to offer securities but have not yet started the offering, the relevant offering and underwriting rules released shall apply, and the SZSE shall carry out the offering and underwriting supervision procedures. As for other circumstances, the offering and underwriting shall be conducted in accordance with the previous rules.

Fourth,regarding the differentiated arrangements for the effective date of the rules. TheTrading Rules,Implementation Rules for Margin Trading and Securities Lending,Implementation Rules for Lending Trading of Securities On-lending,Rules on the Real-time Monitoring of Abnormal Stock Trading on the Main Board, and theNotice on the Abbreviations and Logos of Stocks and Depositary Receiptsreleased this time shall come into force on the first day of the listing of the first Main Board stock under the registration-based IPO system rules, and other rules shall come into force from the date of publication.

VI. What are the work arrangements of SZSE to promote open reviews and enhance integrity risk prevention and control?

A: Since the reform of the registration-based IPO system, SZSE has attached great importance to the clean administration of the registration-based system, and adhered to synchronizing the arrangement, advancement and implementation of the prevention and control of integrity risks and business work while promoting the idea of not daring to, not being able to and not wanting to be corrupt. SZSE has insisted on continuously improving the restriction and supervision mechanism of power operation for issuance and listing review, and embedded all supervision requirements into the whole procedure of the registration-based system. By adhering to the construction of audit transparency, SZSE strives to promote the public disclosure of the audit criteria, procedures, content, process and results. In addition, SZSE has been insisting on strengthening integrity supervision, enhancing management and supervision on key personnel, key positions and key processes, and holding those with law-breaking and rule-violating behaviors accountable based on disciplines.

After the full implementation of the registration-based IPO system, SZSE needs to further assume the main responsibility of review and take more effective measures to prevent integrity risks and develop a clean-fingered registration-based system. To this end, SZSE will further increase its efforts in “open review” based on original work arrangements, strengthen the openness, transparency and predictability of the review, further enhance the mechanism and policy arrangements for integrity risk prevention and control, and reinforce the implementation. Shortly, the focus will be on the following five areas:

First,the communication mechanism throughout the procedure will be continuously unimpeded. The business consultation and communication guidelines will be revised and perfected to further simplify the pre-communication and consultation procedure and improve the convenience of consultation and communication for market players. SZSE will focus on improving the quality and effectiveness of communication in the review process, raising the level of communication, strengthening the explanation on the communication about the starting point, focus and key points of review inquiries, promoting the quality of responses to inquiries, and enhancing the relevance and effectiveness of information disclosure. A communication mechanism for the rejected and withdrawn projects will be established to provide adequate feedback on the problems and main reasons for these enterprises.

Second,the disclosure of reviews on key matters will be continuously enhanced. SZSE will develop an action plan for “double improvement in the review quality and efficiency”, to ensure strict control and efficiency and further highlight the relevance and significance of inquiries. With regard to the market concerns such as grasping the positioning of the ChiNext Board and verification of capital flow, SZSE will actively strengthen research based on review practices and guide market players to accurately understand the requirements of the applicable rules by analyzing typical cases and developing review guidelines as appropriate. Besides, SZSE will continue to conduct issuance and listing business training to highlight review and on-site supervision practices.

Third,the hierarchical accountability system for review will be continuously perfected. SZSE will comprehensively sort out and summarize the review practices, further institutionalize and standardize the basic matters such as the responsibility and authority of personnel at various review levels and positions, the arrangement of the review policy and mechanism, and business procedures, implement the mechanism of hierarchical responsibility and collective decision making, effectively conduct hierarchical checks, strengthen power constraints and reduce review discretionarily. For projects to be reviewed and judged in accordance with the principle of “substance over form”, “collective study and case handling” will be implemented, and the review efforts in the review process will be unified.

Fourth,the review effectiveness will be continuously improved. SZSE will further strengthen the management of the review process, inform applicants in writing of the review procedure nodes and timing rules at the acceptance stage, and further enhance issuers’ understanding of the review process and key nodes. Based on promoting the review process in accordance with the law and regulations, the effective connection of all review processes will be enhanced. SZSE will strictly follow the review procedures and time limits to improve review effectiveness and further reduce the risk of intercession and greetings.

Fifth,the implementation of the integrity commitment policy for the industry will be continuously strengthened. SZSE will improve the integrity commitment policy for issuers, sponsors and related entities, and require relevant market players to submit integrity commitment letters at the time of enterprise declaration. SZSE is committed to strengthening the relevance of on-site supervision, urging and guiding intermediaries to be diligent and responsible, improving the quality of counseling and control, and enhancing cultural and policy development for professional integrity. For illegal behaviors such as breaching the integrity requirements and hunting reviewers, SZSE will take strict regulatory punishment measures to continuously purify the industry ecology and jointly create a market environment of integrity and righteousness.