China

The new Beijing Stock Exchange’s companies are older and less tech-forward than promised

Protocol analyzed data from each of the new companies listed on China's newest exchange.

Beijing skyline

Beijing will soon be home to a new stock exchange.

Photo: Wang Yukun/Getty Images

China is launching a major new stock exchange, this one in the country's capital. Following Xi Jinping's announcement in September, the Beijing Stock Exchange commences operations Monday. Authorities have said the exchange is a "major strategic deployment" that Xi avers will "support the innovation and development of small and medium-sized enterprises." A Protocol analysis of public data about the new exchange shows it's a bit older and less tech-forward than it might sound.

The BSE is China's third equity market aimed at smaller and younger companies, coming 12 years after ChiNext and two years after the STAR Market. How does it compare to the first two, especially STAR, which in the last two years have welcomed companies like Transsion and Semiconductor Manufacturing International Corporation?

Looking at the companies already listed on BSE offers an early answer. The majority of these companies are directly transferred from the Select tier of the National Equities Exchange and Quotations, the Chinese over-the-counter system for trading shares of companies not already listed on Shanghai or Shenzhen's exchanges. Protocol analyzed all 71 companies on NEEQ Select tier, comparing their industry sectors, employee numbers and market caps. (Eleven more companies have been approved for listing and may do so on or before Nov. 15.)

Tech, but 'hard' tech

The data shows BSE companies mostly focus on industries like advanced manufacturing and materials that aren't traditionally considered "tech." Only 22.5% are either software or hardware firms.


The most represented sector: capital goods, with 23.9% of companies, which focus on making engineering, agriculture or aviation equipment. The materials industry takes second place with 15.5%, and the pharmaceutical/biotech industry is third with 11.3%.

Beijing has said BSE aims to serve companies that excel at "Specialization, Refinement, Differentiation, Innovation," (专精特新), a concept first coined by the Ministry of Industry and Information Technology in 2011. It's a vague concept, and what Beijing appears to mean is it wants something different from STAR, which has a clear mandate to serve tech companies.

"What 'specialization, refinement, differentiation and innovation' refers to in China is not directly related to the Internet. It's more about hard tech," Bo Pei, equity research analyst at U.S. Tiger Securities, told Protocol. "For companies in soft tech or applied innovation, [BSE] is not the place for them. It makes more sense for them to choose [a] listing in Hong Kong."

Rule by the old and the small

Companies listed on BSE are significantly smaller than their peers on other exchanges. Of the 71 companies, 32 have a market cap below $250 million, and the median number is $263 million.

Among five companies with a market cap larger than $1 billion, two of them (BTR New Material and Sichuan Changhong New Energy) make batteries, while one (Dalian LINTON Technologies) makes semiconductor parts used in photovoltaics. These three firms have benefited from the recent surge of interest in the new energy industry.

About one-third of listed companies have fewer than 250 employees, putting them squarely in the SME range.


These are the types of companies that are off the radar for anyone outside of China. The minimum market cap for listing on BSE is 200 million RMB (just $31.25 million), whereas the minimum market cap among STAR companies is five times that number.

"Most of [the companies on the STAR Market] are already industry leaders, while the Beijing Stock Exchange is mainly serving small and medium-sized enterprises with some innovative features," said Lerong Lu, senior lecturer in law at King's College London. That makes BSE look like more of a stepping stone for companies before they ascend to the other two markets.

"A small-sized startup should start with listing on NEEQ and ascend through the Base tier and Innovation tier, then list on Beijing Stock Exchange. If they are big enough and meet all the requirements, they can consider transferring to STAR or ChiNext," said equity analyst Bu Naxin.

Southern power

Ten of the 71 companies on BSE have their headquarters in Beijing. The majority of other companies still concentrate in southern, economically developed provinces, especially those strong in manufacturing like Jiangsu and Guangdong. Surprisingly, there are only three companies from Shanghai, but again this may be related to the emphasis on advanced manufacturing.



In the future, expect more companies from the north to consider listing in BSE, as its establishment had taken into consideration the unbalanced nature of China's financial market. "It will elevate the financial strength of Beijing and northern China, as Shanghai and Yangtze River Delta Area already has the Shanghai Stock Exchange and Great Bay Area has Shenzhen and Hong Kong stock exchanges," Lerong Lu said. "It is a balancing act."

Policy

Musk’s texts reveal what tech’s most powerful people really want

From Jack Dorsey to Joe Rogan, Musk’s texts are chock-full of überpowerful people, bending a knee to Twitter’s once and (still maybe?) future king.

“Maybe Oprah would be interested in joining the Twitter board if my bid succeeds,” one text reads.

Photo illustration: Patrick Pleul/picture alliance via Getty Images; Protocol

Elon Musk’s text inbox is a rarefied space. It’s a place where tech’s wealthiest casually commit to spending billions of dollars with little more than a thumbs-up emoji and trade tips on how to rewrite the rules for how hundreds of millions of people around the world communicate.

Now, Musk’s ongoing legal battle with Twitter is giving the rest of us a fleeting glimpse into that world. The collection of Musk’s private texts that was made public this week is chock-full of tech power brokers. While the messages are meant to reveal something about Musk’s motivations — and they do — they also say a lot about how things get done and deals get made among some of the most powerful people in the world.

Keep Reading Show less
Issie Lapowsky

Issie Lapowsky ( @issielapowsky) is Protocol's chief correspondent, covering the intersection of technology, politics, and national affairs. She also oversees Protocol's fellowship program. Previously, she was a senior writer at Wired, where she covered the 2016 election and the Facebook beat in its aftermath. Prior to that, Issie worked as a staff writer for Inc. magazine, writing about small business and entrepreneurship. She has also worked as an on-air contributor for CBS News and taught a graduate-level course at New York University's Center for Publishing on how tech giants have affected publishing.

Sponsored Content

Great products are built on strong patents

Experts say robust intellectual property protection is essential to ensure the long-term R&D required to innovate and maintain America's technology leadership.

Every great tech product that you rely on each day, from the smartphone in your pocket to your music streaming service and navigational system in the car, shares one important thing: part of its innovative design is protected by intellectual property (IP) laws.

From 5G to artificial intelligence, IP protection offers a powerful incentive for researchers to create ground-breaking products, and governmental leaders say its protection is an essential part of maintaining US technology leadership. To quote Secretary of Commerce Gina Raimondo: "intellectual property protection is vital for American innovation and entrepreneurship.”

Keep Reading Show less
James Daly
James Daly has a deep knowledge of creating brand voice identity, including understanding various audiences and targeting messaging accordingly. He enjoys commissioning, editing, writing, and business development, particularly in launching new ventures and building passionate audiences. Daly has led teams large and small to multiple awards and quantifiable success through a strategy built on teamwork, passion, fact-checking, intelligence, analytics, and audience growth while meeting budget goals and production deadlines in fast-paced environments. Daly is the Editorial Director of 2030 Media and a contributor at Wired.
Fintech

Circle’s CEO: This is not the time to ‘go crazy’

Jeremy Allaire is leading the stablecoin powerhouse in a time of heightened regulation.

“It’s a complex environment. So every CEO and every board has to be a little bit cautious, because there’s a lot of uncertainty,” Circle CEO Jeremy Allaire told Protocol at Converge22.

Photo: Circle

Sitting solo on a San Francisco stage, Circle CEO Jeremy Allaire asked tennis superstar Serena Williams what it’s like to face “unrelenting skepticism.”

“What do you do when someone says you can’t do this?” Allaire asked the athlete turned VC, who was beaming into Circle’s Converge22 convention by video.

Keep Reading Show less
Benjamin Pimentel

Benjamin Pimentel ( @benpimentel) covers crypto and fintech from San Francisco. He has reported on many of the biggest tech stories over the past 20 years for the San Francisco Chronicle, Dow Jones MarketWatch and Business Insider, from the dot-com crash, the rise of cloud computing, social networking and AI to the impact of the Great Recession and the COVID crisis on Silicon Valley and beyond. He can be reached at bpimentel@protocol.com or via Google Voice at (925) 307-9342.

Enterprise

Is Salesforce still a growth company? Investors are skeptical

Salesforce is betting that customer data platform Genie and new Slack features can push the company to $50 billion in revenue by 2026. But investors are skeptical about the company’s ability to deliver.

Photo: Marlena Sloss/Bloomberg via Getty Images

Salesforce has long been enterprise tech’s golden child. The company said everything customers wanted to hear and did everything investors wanted to see: It produced robust, consistent growth from groundbreaking products combined with an aggressive M&A strategy and a cherished culture, all operating under the helm of a bombastic, but respected, CEO and team of well-coiffed executives.

Dreamforce is the embodiment of that success. Every year, alongside frustrating San Francisco residents, the over-the-top celebration serves as a battle cry to the enterprise software industry, reminding everyone that Marc Benioff’s mighty fiefdom is poised to expand even deeper into your corporate IT stack.

Keep Reading Show less
Joe Williams

Joe Williams is a writer-at-large at Protocol. He previously covered enterprise software for Protocol, Bloomberg and Business Insider. Joe can be reached at JoeWilliams@Protocol.com. To share information confidentially, he can also be contacted on a non-work device via Signal (+1-309-265-6120) or JPW53189@protonmail.com.

Policy

The US and EU are splitting on tech policy. That’s putting the web at risk.

A conversation with Cédric O, the former French minister of state for digital.

“With the difficulty of the U.S. in finding political agreement or political basis to legislate more, we are facing a risk of decoupling in the long term between the EU and the U.S.”

Photo: David Paul Morris/Bloomberg via Getty Images

Cédric O, France’s former minister of state for digital, has been an advocate of Europe’s approach to tech and at the forefront of the continent’s relations with U.S. giants. Protocol caught up with O last week at a conference in New York focusing on social media’s negative effects on society and the possibilities of blockchain-based protocols for alternative networks.

O said watching the U.S. lag in tech policy — even as some states pass their own measures and federal bills gain momentum — has made him worry about the EU and U.S. decoupling. While not as drastic as a disentangling of economic fortunes between the West and China, such a divergence, as O describes it, could still make it functionally impossible for companies to serve users on both sides of the Atlantic with the same product.

Keep Reading Show less
Ben Brody

Ben Brody (@ BenBrodyDC) is a senior reporter at Protocol focusing on how Congress, courts and agencies affect the online world we live in. He formerly covered tech policy and lobbying (including antitrust, Section 230 and privacy) at Bloomberg News, where he previously reported on the influence industry, government ethics and the 2016 presidential election. Before that, Ben covered business news at CNNMoney and AdAge, and all manner of stories in and around New York. He still loves appearing on the New York news radio he grew up with.

Latest Stories
Bulletins