Research On The Issue Of Switch Board In China NEEQ

For many years China's economy has been growing rapidly,presenting lincreasingly high demands on the growth of small and medium enterprises(SMEs),a critical participant in China's economic development.Whilst striving tp adapt to major changes like the upgrading of production mode,the disappearance of labor cost dividends,the innovation of production technology,etc.-all of which hinder the rapid development of small and medium-sized enterprises-SMEs step up their own demands for financing.Yet they are faced with financing difficulties in terms of financing scale,financing methods and financing channels.Indirect financing,the major means employed by China's SMEs,has a variety of problems including high costs,imperfect credit guarantee system,imperfect legal system and information asymmetry.In this context,the growing importance of direct financing channels is worth noting.The capital market that provides direct financing channels in China mainly composes of centralized trading market and over-the-counter(OTC)market.Centralized trading market includes main-board market,SME board market and growth enterprise market(GEM),while the OTC market includes the National Equities Exchange and Quotations(NEEQ)or the "New Third Board",regional equity trading market and the OTC market in its narrow sense.The establishment and development of SME board,GEM,and NEEQ indicates that China's multi-level capital market has begun to take shape.The number of companies listed on the New Third Board has increased rapidly since initial expansion,reaching over ten thousand up to date.The financing situation of these companies,however,instills little optimism.From the perspective of the companies,the proportion of listed companies engaging in additional issuance has been declining for years after the peak in 2015.This indicates that to some extent,the listed companies' enthusiasm in financing within the NEEQ market is reducing,whilst the financing conditions are deteriorating.From the perspective of the overall trading environment of the NEEQ market,not only the size of the shares involved in the transaction is relatively small in comparison with the main-board,the SME board and the GEM,but also,the volume of stock transactions completed is far from enough.In fact,the daily trading volume of the entire NEEQ market is sometimes smaller than that of a single stock on the main-board,the SME board or GEM.The financing status of the overall liquidity of the NEEQ could no longer meet the financing needs of the top-quality enterprises which,though derived from the NEEQ,now seek for better development by transferring themselves to higher financing platform.Nevertheless,the interplay between different levels of the capital market is relatively rare at this stage.The most commonly seen is the transfer of NEEQ-listed companies towards the GEM.However,there are only 51 cases of successful transfer so far,primarily due to the imperfection of China's multi-level capital market framework and the defects in transfer mechanism.In its initial stage,the NEEQ market is oriented to resolve the financing difficulties for SMEs.Further improvements of the transfer mechanism would,to some extent,solve existing problems like high financing costs and huge investment of time.Moreover,high-quality enterprises incubated from the NEEQ market could have a smoother transfer to higher-level capital market.As a bridge connecting different sectors of the capital market,the improvements of NEEQ transfer mechanism plays a significant role in building and perfecting China's multi-level capital market.This paper comprises of three parts.The first part explains the developmental processes of China's NEEQ market and the current situations of NEEQ transfers,thus laying the foundation for further case analysis of Topstar Technology Co.,Ltd.(Topstar).The review of existing studies on domestic and international board-transfer cases also provide important theoretical support for further discussions about the transfer mechanism.The second part of this paper focuses on Topstar's transfer,analyzing the company's operation performance,its motivations of transfer,preconditions of transfer,transfer costs,and so forth,and discusses potential problems during its transfer.Based on Topstar's case,the final part of the paper put forwards suggestions for improving the transfer mechanism,including possible enhancements of the related supporting system,the setup of diversified transfer channels,improvements of the NEEQ stratification system,and promotion of reforming the registration system.