Drying equipment when GEM is in progress
With the GEM (Growth Enterprise Market) initiative gaining momentum, Shandong, a province rich in listed resources, has taken proactive steps to support local companies in accessing this platform. According to Li Yongjian, deputy director of the Shandong Provincial Development and Reform Commission, the province is currently examining the listing potential of GEM stocks within its eight high-tech parks. Following the release of the draft IPO guidelines, several enterprises in Shandong have shown strong interest. To better understand the situation, reporters conducted interviews with various business leaders, who raised several key concerns.
Firstly, there is a call for the GEM to continue encouraging innovation. Chai Bingyin, general manager of Shandong Tianli Drying Equipment Co., Ltd., emphasized that serving high-growth, innovative SMEs should be the core mission of the GEM. However, he expressed disappointment that the draft removed specific recognition and preferential treatment for high-tech enterprises. Similarly, a representative from Weihai Fishery Science and Technology Development Co., Ltd., which is eager to list on the GEM, believes the board should still reflect certain advantages for high-tech firms. He argued that emphasizing innovation and protecting shareholder rights are not mutually exclusive. For instance, the Torch Program's evaluation criteria include national needs, technological content, and commercialization potential. He added that truly innovative products are often unrecognized at first, and professional assessments help ensure market viability and social impact. In contrast, if a product is widely recognized, it may not need the GEM for financing.
Secondly, regulatory measures must strike the right balance. While the exposure draft outlines stricter rules for profit forecasts—such as issuing warnings if actual profits fall below 80% of projections—some companies feel this threshold is too rigid. Many believe that the GEM’s high-risk nature requires more rigorous oversight than the main board. However, they also argue that setting such a strict benchmark might make the GEM less attractive compared to other financing channels. If projects are deemed low-risk based on this standard, it could undermine the GEM’s unique value proposition.
Thirdly, intermediaries remain a bottleneck. Most companies agree that the GEM’s financial requirements are reasonable, with thresholds like cumulative net profits over 10 million yuan being relatively low. Zhang Wei, deputy director of the Capital Markets Division of the Shandong Provincial Development and Reform Commission, noted that Shandong’s eight high-tech parks have sufficient listed resources. However, some companies that hoped to break through under the three-year requirement may fall short. Gao Dezong, president of Qingdao Liangyou Catering Co., Ltd., said his company, though less than three years old, meets or exceeds the GEM’s financial criteria. He wished the GEM would be more flexible in this regard. Meanwhile, Hao Zhibo, deputy manager of Shandong Chu Group, pointed out that lowering the threshold alone isn’t enough. His subsidiary previously listed on the GEM, but he highlighted the sponsor system as a major constraint. With limited sponsors and high demand, many firms struggle to find suitable advisors. Even with no cap on the number of applications, the quality of guidance remains an issue. Therefore, developing a multi-tiered capital market requires comprehensive institutional coordination to ensure sustainable growth.
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