TAIPEI (TheStreet) -- China started clearing its long IPO queue this year to reanimate weak stock markets after a 14-month ban on IPOs. Consistent with that full-on approach, the country's board for growth enterprises will relax financial requirements and usher in a flood of newly public, hapless companies that you've never heard of.
Their shares are risky and should be avoided. A relaxation of rules will just allow more shady shares to be traded as new companies reach the market.
An easing of the China Securities Regulatory Commission's pre-IPO financial requirements was announced in mid-March. That will add to the ChiNext board's 379 listed companies, per speculation in the Chinese media. Most are tipped to be tech firms, like 93% of those listed now, but not the likes of China's headline Internet content providers or handset makers.
A lowering of the bar for this Nasdaq-style board advances China's overall goal to grow its economy through a maturation of capital markets, which are now widely considered unsafe due to lack of regulation, transparency and value for minority shareholders. Smaller firms, including those that lose money but are backed by assets, need a chance to start out, the ChiNext regulators probably figure.
China resumed allowing IPOs for its main A-share board after a freeze to stop fraud. That move followed leadership pledges of IPO procedural reforms and a stronger market role in an economic overhaul. China is probably looking to the IPOs to sustain economic growth that slowed to 7.8% last year, coming off a decade of 9% to 10% growth. Some 700 companies are in line for A-share IPO approval now.