Summary of Key Developments
Over the past seven years, the STAR Market has grown into a pivotal platform, attracting more than 600 high-tech companies with a total market value exceeding 18 trillion yuan. It serves as a testing ground for the registration-based IPO system and has facilitated the transformation of investment banks from traditional underwriters to "industry-specific" financial institutions. Recent reforms have included AI within the fifth set of listing criteria, addressing the challenge of slow profitability for AI startups. Leading firms like China International Capital Corporation (CICC) are leveraging a combination of investment and banking services to support high-tech companies and promote industrial upgrading through mergers and acquisitions.
I. The STAR Market: From a Pilot to a Powerhouse for High-Tech
The STAR Market is not an ordinary stock segment; it's a dedicated "green channel" for high-tech enterprises. Since its inception, it has expanded from 25 initial companies to a large community of over 600 firms with a combined market value of 18 trillion yuan and nearly one trillion yuan in financing. These companies operate in vital sectors such as integrated circuits, biomedicine, and advanced manufacturing, fostering industry clusters led by leading enterprises like SMIC and United Imaging Healthcare. Notably, the STAR Market has maintained an annual R&D investment rate of 13% for seven consecutive years (the highest among A-share markets), establishing a sustainable cycle from research to technological breakthroughs to commercial success. Its innovative systems, such as the registration-based IPO system, have been adopted across the entire market, setting an example for broader reforms.
II. AI Companies Can Now List on the STAR Market! What Are the Benefits of This Reform?
Previously, it was difficult for AI companies to go public due to traditional listing criteria that focused on short-term profitability. However, the new fifth set of standards now considers four key factors: the presence of genuine technology, tangible results (e.g., the practical application of large models), government approval, and market potential. Sun Lei notes that this change transforms AI from a tool into a fundamental infrastructure, providing much-needed capital for emerging industries at their early stages.
III. The Transformation of Investment Banks
Under the registration-based system, investment banks cannot simply assist companies with going public and then stop their involvement. They must develop three core capabilities:
1. Value Discovery: Identifying the true technical value of companies beyond financial statements.
2. Due Diligence: Thoroughly assessing the technology's viability, data compliance, and potential for commercialization.
3. Asset Valuation: Pricing AI companies based on model strength, commercial progress, long-term potential, and technological barriers (with reference to valuations in the Hong Kong stock market).
Investment banks must also shift from a short-term support role to a long-term partnership, given the lengthy R&D cycles of high-tech companies.
IV. CICC's Integrated Approach: Investing and Banking for Corporate Growth
CICC adopts a dual strategy of investment and banking. For example, it invested in Shenghe Jingwei as early as 2021 and assisted the company in its listing on the STAR Market, with CICC Wealth participating in the strategic placement. This integrated approach ensures comprehensive support from the company's inception to its public offering, creating a closed-loop of investment, growth, and ongoing support.
As of June this year, CICC has sponsored over 50 companies on the STAR Market, raising more than 200 billion yuan (20% of the market's total financing). It has handled significant projects like SMIC and BeiGene.
V. Mergers and Acquisitions: The Accelerator for High-Tech Industry Upgrading
Mergers and acquisitions have gained momentum, as they help companies consolidate resources and advance their industries. CICC played a key role in the largest restructuring project in the STAR Market, facilitating the integration of critical resources for the integrated circuit industry. By 2025, CICC aims to exceed one hundred billion dollars in mergers and acquisitions, leading the nation in this area. Sun Lei emphasizes that these transactions are more than just business deals; they are crucial for transforming research outcomes into market-ready products and strengthening emerging industries. CICC will continue to use this tool to support the growth of high-tech companies.
In conclusion, the STAR Market's development over the past seven years has not only provided a financing platform for high-tech firms but also driven the transformation of investment banks and the capital market. With the addition of new sectors like AI, the STAR Market will become a core platform for fostering innovative growth. Firms like CICC will play a vital role in supporting China's high-tech industry to achieve greater autonomy and competitiveness through specialized services.