BEIJING- Two non-listed high-tech enterprises in Beijing will become the first firms to trade shares through China's over-the-counter (OTC) stock trading system on January 23.
It is the first time that companies that are not listed anywhere else will be able to use the OTC to trade their stock.
China's current OTC stock trading system, also called a stock transfer agent system or "the third board," was originally set up for delisted public firms.
These used the OTC to continue to trade their stock after being barred from using the Shanghai or Shenzhen stocks exchanges.
Companies joining the system in the future are expected to come from high-tech sectors at the early stages of development.
"It provides a solution for high-tech companies, mainly small and medium-sized enterprises, that do not qualify to trade on the stock exchange," said Ju Jiangbin, an official in charge of securities fairs at Beijing C-Real Tech Co Ltd.
The company, together with Chinasoft Co Ltd, announced it had received official approval from the China Securities Regulatory Commission (CSRC) on Monday to join the OTC system. Both firms are high-tech enterprises from Beijing Zhongguancun Science Park.
The CSRC also said four more high-tech firms based in the park will be able to join the OTC system later on.
"This new move means we are already on the way to becoming a public firm," said He Chuan, director of the board at Chinasoft Co Ltd. "You could say we are already half-public."
Firms that have traded stock on "the third board" are expected to have easier access to the Shanghai or Shenzhen stock exchanges, or the Shenzhen small and medium-sized enterprises exchange, according to a source at the Securities Associate Commission (SAC).
Shareholders of the new companies joining the OTC system will be able to trade their shares, but the firms will not be allowed to issue new stock to raise capital.
According to the SAC, companies applying to have stocks traded on the OTC system must satisfy several requirements.
For example, they should be legal joint stock companies with a complete management structure. Investors should also open a non-listed company stock transfer account before they can transfer stock in the system.
The move, experts say, provides a way for small, new or unstable companies that are not able to list on traditional stock exchanges to trade their stock. It may also help investors find more transaction partners.
The introduction of more joint-stock companies is part of the government's continuing efforts to build a multi-level capital market.
The OTC system will become a competitor of the equity exchange market in Beijing, where non-listed companies can make equity transactions.
OTC stock transaction systems are more developed in Western countries. Currently, over 1,000 companies make stocks transactions using this method in the US. Experts estimate that nearly 2,000 companies in China will transact their stock through the OTC in the future.
