Playground: how the first Chinese technology exchange can help Beijing in a trade war with the United States

On Monday, July 22, the first stock exchange for technology companies started operating in China - the SSE STAR Market. The trading platform is analogous to the American NASDAQ and is intended to become a new platform for attracting investment in the PRC IT sector.

The debut auction was attended by 25 organizations, and the total volume of transactions exceeded $ 7 billion. At the same time, the average increase in the value of shares amounted to 140%, and the securities of some companies went up by 200% and 400% at once. This is evidenced by the data on the official website of the SSE STAR Market.

It is noteworthy that the intention to create a separate research and innovation division on the basis of the Shanghai Stock Exchange, PRC President Xi Jinping was voiced in November 2018. According to experts polled by RT, Beijing decided to open its technological platform against the backdrop of a flaming trade war with Washington. Now, as expected, IT companies in the Asian Republic will be able to develop and receive funding regardless of external constraints of the States.

“Creating your own infrastructure, including the exchange, is an element of risk minimization - regulatory, economic and political - in an environment where protectionism and the struggle for technology and the admission of companies to the markets are sharply intensified,” the chief strategist of UNIVER explained in an interview with RT Capital "Dmitry Alexandrov.

Recall that the trade standoff between the two largest economies in the world began in early 2018. The United States accused China of illegally obtaining American technology and intellectual property. According to the White House administration, the actions of China led to the fact that the trade deficit of the States with the Asian Republic reached $ 375 billion.

In May 2018, the countries agreed on a peaceful settlement of the conflict, but the US side decided to launch a full-scale trade war and imposed duties on half of Chinese exports ($ 250 billion). In response, Beijing introduced tariffs of 5% and 10% on imports of American products for $ 60 billion, after which Washington promised to introduce duties on all deliveries from China.

In December, at the G20 summit in Argentina, the two states again agreed on a truce. The states promised not to raise duties from January 1, 2019, and the parties agreed to conclude a trade deal until March 1.

After a series of successful negotiations in early 2019, in May, the States accused China of delaying the transaction and increased duties on Chinese goods worth $ 200 billion. Moreover, Donald Trump also threatened to impose additional tariffs on products of $ 300 billion. Beijing, in turn, introduced retaliatory duties in the amount of $ 60 billion from June 1, while US technology companies began to discontinue cooperation with the Chinese giant Huawei.

“Now the securities traded in China, even in theory, will not be bound by any burdensome restrictions if they are thought up by the US financial authorities. Naturally, most of the benefits from operations and brokerage services for foreign investors in this case will be received by Chinese companies - intermediaries, and not American, as was the case with the initial public offerings (IPO) in the United States, ”said the analyst of the Civil Code in an interview with RT. TeleTrade Peter Pushkarev.

It should be noted that previously many large digital market players from China had their IPOs on the American trading floors. For example, the shares of the Chinese giant in the field of Internet commerce Alibaba Group are traded on the New York Stock Exchange, and the securities of the Internet company Baidu - on NASDAQ.

However, as a result of the US trade and technological conflict with the PRC, Chinese companies are becoming less attractive to American investors. Thus, it becomes more profitable for IT corporations and start-ups of the Asian Republic to place their shares on the domestic market, rather than abroad. This was in a conversation with RT told a senior analyst at BCS Premier, Sergei Suverov.

“The trade war reduces the interest of American investment funds to Chinese IT companies, especially in the context of a possible US and Chinese clash in the struggle for technological leadership in the world. Therefore, the idea of ​​the Chinese NASDAQ is relevant in the light of the potential entry of Chinese technology companies to the stock exchange in order to attract financing from them, ”said Suverov.

According to the Shanghai Stock Exchange, over 140 Chinese technology companies have already applied for an initial public offering of their shares on the SSE STAR Market. At the beginning of July, over 30 organizations received approval, but only 25 players were admitted to trading in the first stage.

According to RT experts polled, further growth in the number of IPOs on the new exchange simultaneously with the support of the Chinese authorities will significantly increase the inflow of investments in the technology sector and accelerate the slowed-down economy of the country. According to the State Statistical Office of the People's Republic of China, in the second quarter of 2019, the country's GDP growth amounted to only 6.2%. The value has been minimal since 1992.