New Cloud East New Third Board:What is the relationship between the New Third Board and the New Cloud East concept in China's capital market?

Q: What is the relationship between the New Third Board and the New Cloud East concept in China's capital market?

A: The New Third Board (National Equities Exchange and Quotations, NEEQ) is a pivotal over-the-counter market for small and medium-sized enterprises in China. 'New Cloud East' is not an official regulatory term but frequently appears in market discussions to describe a new wave of cloud computing and digital economy enterprises seeking listing or financing on the New Third Board. According to the China Securities Regulatory Commission's 2023 Annual Report, the NEEQ has continuously upgraded its services to support technology-driven SMEs. The 'New Cloud East' narrative reflects investors' anticipation of a cluster of cloud-native, data-centric firms entering this market, aligning with national digital infrastructure strategies and the Beijing Stock Exchange's growth.

Q: How does the New Third Board support cloud computing and digital economy companies?

A: The New Third Board provides a multi-tiered platform for cloud computing and digital economy firms to access equity financing. Through its innovation tier and base tier, companies can issue shares, convertible bonds, and conduct private placements. The CSRC's 2022 report on NEEQ reform highlights that technology enterprises receive prioritized review under the 'specialized and sophisticated' (Zhuan Jing Te Xin) framework. Additionally, the Beijing Stock Exchange, which originated from the NEEQ Select tier, offers a direct path to public listing. This ecosystem enables cloud-focused SMEs to raise capital for R&D, expand data center operations, and commercialize cloud services, thereby accelerating China's digital transformation agenda.

Q: What official policies govern listings on the New Third Board for technology firms?

A: The primary regulations include the CSRC's 'Measures for the Supervision and Administration of Non-Listed Public Companies' and the NEEQ's 'Business Rules for Listing and Trading.' In 2023, the CSRC further optimized the tiered system, allowing innovative SMEs to enter the innovation tier with lower financial thresholds if they meet R&D intensity criteria. The Ministry of Industry and Information Technology's '14th Five-Year Plan for Software and Information Technology Services' encourages cloud enterprises to utilize the New Third Board for financing. These policies collectively create a supportive framework, ensuring that cloud-native and digital economy firms can navigate the listing process efficiently while maintaining compliance and investor protection.

Q: What is the role of the Beijing Stock Exchange in relation to the New Third Board and cloud enterprises?

A: The Beijing Stock Exchange (BSE) was established in 2021 as a successor to the NEEQ Select tier, forming a connected chain: base tier, innovation tier, and BSE. According to the BSE's 2023 annual report, it focuses on serving innovative SMEs, including those in cloud computing, big data, and AI. Companies can transfer from the NEEQ innovation tier to the BSE once they meet listing criteria, which include market cap, revenue, and R&D investment. For cloud enterprises, the BSE offers higher liquidity, broader investor access, and stronger brand recognition. This linkage effectively provides a growth pathway, allowing cloud firms to start on the New Third Board and mature into BSE-listed public companies.

Q: What are the risks and challenges for cloud companies listed on the New Third Board?

A: Cloud companies on the New Third Board face several challenges. First, liquidity is relatively low compared to main boards, making it harder to raise large-scale capital. Second, compliance costs for continuous disclosure and corporate governance can strain smaller firms. Third, market volatility and investor skepticism toward early-stage tech business models may affect valuations. The CSRC's 2023 risk monitoring report notes that information asymmetry and insufficient analyst coverage remain issues. Additionally, fierce competition in the cloud sector requires sustained R&D investment, which may not be fully met by NEEQ financing. Companies must therefore carefully balance growth strategies with regulatory obligations to succeed on this market.

Dialogue about

Common scenarios of "New Cloud East New Third Board"

【Financial Advisor】 Hi, I heard you're interested in the New Third Board. Are you familiar with the New Cloud East segment?

【Investor】 Not really. I know the New Third Board is for smaller companies, but what's New Cloud East?

【Financial Advisor】 New Cloud East is a new segment of the New Third Board launched in 2020. It's designed for innovative, high-growth companies that meet specific financial and innovation criteria.

【Investor】 What are the criteria to be listed on New Cloud East?

【Financial Advisor】 Companies need to meet at least one of several standards. For example, a market cap of at least 200 million RMB and positive net profit for two years, or market cap of 400 million RMB and revenue of at least 200 million RMB with positive operating cash flow.

【Investor】 That sounds more selective than the base New Third Board. What are the benefits of listing there?

【Financial Advisor】 Listing on New Cloud East can enhance visibility, attract institutional investors, and provide a pathway to the STAR Market or ChiNext. It also allows for continuous trading and higher liquidity.

【Investor】 Can retail investors like me invest in New Cloud East stocks?

【Financial Advisor】 Yes, but there are requirements. You need to have at least 1 million RMB in securities assets and two years of investment experience. It's considered a higher-risk market.

【Investor】 I see. How does trading work? Is it like the main board?

【Financial Advisor】 Not exactly. New Cloud East uses a continuous auction mechanism during trading hours, but the price limit is 30% per day. Also, the minimum trading unit is 100 shares.

【Investor】 What about liquidity? Are there many buyers and sellers?

【Financial Advisor】 Liquidity is better than the base New Third Board but can still be lower than main board stocks. It's important to research the company's fundamentals and trading volume.

【Investor】 Are there any recent developments or reforms for New Cloud East?

【Financial Advisor】 Yes, in 2023, the CSRC announced further reforms to improve liquidity, including introducing market makers and possibly lowering investor thresholds in the future.

【Investor】 That's good to know. What types of companies are typically listed there?

【Financial Advisor】 Mostly tech, biotech, advanced manufacturing, and other innovative sectors. Many are pre-IPO companies looking to grow.

【Investor】 How can I start investing in New Cloud East?

【Financial Advisor】 You'll need to open a New Third Board account with a qualified broker, meet the asset and experience requirements, and then you can trade through their platform.

【Investor】 Thanks for the information. I'll look into it further and consider the risks.