China's Capital Market Enters a New Phase of Quality Enhancement and Targeted Empowerment
Registration-Based Reform Enters a New Phase: “Quality Enhancement + Precision Empowerment” — Three Structural Breakthroughs in Capital Market Institutional Upgrading
In Q2 2025, China’s capital market underwent an intensive, coordinated, and highly targeted round of institutional upgrading: the Shanghai Stock Exchange (SSE) simultaneously launched operational guidelines for actively managed ETFs, expanded the STAR Market to cover cutting-edge fields—including quantum computing, embodied intelligent robotics, and brain-computer interfaces—and officially implemented the revised fifth listing standard, specifically tailored for AI large-model enterprises. This is not an isolated policy overlay but rather a landmark turning point signaling registration-based reform’s evolution from “broadening coverage” to “enhancing quality + delivering precision empowerment.” Its underlying logic lies in optimizing institutional supply structurally to meet the dual imperatives of accelerating technological revolution and deepening national strategic advancement. This round of upgrades is systematically reshaping the capital market’s functional positioning, resource allocation efficiency, and global pricing weight.
I. Actively Managed ETFs: A Tool Revolution—from “Passive Tracking” to “Strategy-Driven Execution”
Historically, domestic ETFs have predominantly been passive index products whose core logic is low-cost replication of broad-market or sectoral indices. The SSE’s newly released Guidelines on Actively Managed ETF Business, however, establishes—within regulatory frameworks—for the first time the legitimacy and operational architecture of combining active management with the ETF structure. Its three core breakthroughs are:
- Allowing fund managers to conduct moderate active adjustments—such as component stock substitutions and dynamic weight optimization—within predefined index constraints;
- Specifying stringent disclosure requirements—including quarterly full portfolio holdings and strategy performance retrospectives;
- Introducing differentiated fee structures and liquidity support mechanisms.
The significance of this initiative extends far beyond product innovation. It effectively elevates ETFs from mere “asset allocation conduits” to “execution vehicles aligned with national strategic priorities.” For instance, future actively managed strategies could include “Hard-Tech Breakthrough ETFs” or “Eastern Data, Western Computing Theme ETFs,” leveraging algorithmic models to dynamically identify pivotal enterprises advancing domestic substitution—e.g., firms achieving photoresist validation success, mass-producing RISC-V chips, or delivering 6G terahertz communication modules—thus enabling long-term capital to genuinely “invest early, invest small, and invest in hard tech.” According to China Securities Index Co., Ltd., if actively managed ETF assets reach the trillion-RMB scale, technology-sector asset allocation efficiency could improve by over 30%, significantly alleviating today’s structural imbalance—where mutual fund portfolios concentrate heavily on a few blue-chip leaders while SMEs and innovative tech firms struggle to access financing.
II. STAR Market Expansion: Functional Leap—from “Listing Board” to “Incubator of Frontier Industries”
This STAR Market expansion goes well beyond simply adding new industry categories. Instead, it precisely targets three emerging domains—quantum computing hardware and software stacks, embodied intelligent robotics (including physical platforms and operating systems), and non-invasive brain-computer interface clinical translation—based on a three-dimensional framework evaluating technology maturity, industrialization inflection points, and national strategic urgency. Notably, the SSE concurrently issued its Trial Q&A on Listing Review for Future Industries, establishing differentiated review criteria for these sectors: companies may apply even without profitability, provided they meet all of the following conditions—R&D expenditure accounting for over 40% of revenue for three consecutive years; core patents entering the PCT international phase; and endorsement via collaboration with national key laboratories or top-tier hospitals.
This “use-case-oriented review” directly addresses pain points faced by hard-tech enterprises. Consider a quantum computing startup whose superconducting quantum processor has yet to achieve commercialization—but has already undergone computational verification at China’s National Supercomputing Center and participated in financial risk-control algorithm testing. Such a closed-loop integration of technology–application scenario–validation was previously difficult to capture under traditional financial metrics. At this stage, the STAR Market has transcended its identity as merely an exchange board—it has become a “systemic infrastructure” supporting national frontier science and technology initiatives. Valuation logic in the primary market is likewise being redefined: pre-IPO rounds now assess not only revenue growth rates but also the strategic value of a given technology pathway within China’s industrial chain security roadmap.
III. Special Listing Standard for AI Large Models: Breaking the Bottleneck in “Capitalizing Technological Value”
The implementation of the fifth listing standard—tailored specifically for AI large-model enterprises—marks a paradigm shift in how the capital market perceives “new productive forces.” The new rules explicitly designate four hard thresholds: scale of model parameters, certification of multimodal capabilities, contract value from vertical-industry deployment, and domestic computing power compatibility rate. While net profit requirements are waived, applicants must mandatorily disclose audit reports on training data compliance and results of formal safety assessments.
This design responds directly to real-world challenges. Most domestic large-model enterprises currently face a paradox: technological leadership coexists with incomplete commercialization. Developing hundred-billion- or trillion-parameter models incurs R&D costs routinely exceeding several billion RMB—but B2B orders remain largely customized pilots, failing to satisfy conventional profitability benchmarks. By substituting technology maturity for financial metrics, the new standard avoids blind capital chasing of a “parameter arms race,” while simultaneously opening a fast-track channel for enterprises demonstrating genuine engineering capability. Positive market signals have already emerged: one industrial-quality-inspection-focused large-model company initiated IPO counseling within one week of the rule’s release. Its competitive edge lies not in parameter scale, but in achieving a 99.99% false-detection rate in automotive weld-joint inspection—with full deployment on Huawei Ascend AI clusters. This exemplifies precisely the “domestic computing power + vertical application” dual-driven model the new standard seeks to incentivize.
IV. Systemic Impact: Restructuring Primary-Market Valuations and Global Capital Pricing Weight
The synergistic effect of these three institutional upgrades is triggering profound transformations across the capital market ecosystem:
- Primary Market: VC/PE valuation logic is shifting—from “DAU growth curves” toward “depth of technological moats + alignment with national needs”—significantly accelerating early-stage fundraising cycles;
- Secondary Market: Thematic rotation logic is evolving—“AI computing power” now encompasses not just GPU manufacturers, but the entire stack: optical interconnect chips, liquid-cooled servers, and compute-in-memory architectures. Investment themes in robotics have expanded beyond “harmonic drive localization” to encompass “motion-control OS ecosystems”;
- Cross-Border Capital Flows: International index providers—including MSCI and FTSE Russell—have initiated reassessments of Chinese tech assets. By end-2025, at least five new ESG-themed ETFs focusing on cross-domain intersections of quantum–robotics–brain-computer interfaces are expected to be added to emerging-market indices, thereby raising overseas investors’ allocation weight in China’s frontier tech assets.
When institutional supply is precisely embedded at the intersection of technological revolution and national strategy, the capital market transforms from a simple conduit for financial intermediation into a “systemic accelerator” for technological self-reliance and strength. This wave of institutional upgrading—originating at the SSE—ultimately aims to anchor China’s innovative forces with irreplaceable value within the global technological competition landscape.