China's stock market, which had opened the door to initial public offerings (IPOs) even for advanced-technology corporations running deficits, is gradually moving to "separate the wheat from the chaff." As IPO applications from loss-making corporations have risen quickly following expanded policy support, there are even observations in the market that authorities have begun to tighten screening standards again. However, the local investment bank (IB) industry said it is "not yet at the stage where policy changes can be detected," noting that, as IPO applications have surged, the quality of corporations is now being assessed more strictly than in the past.
According to a report on the 28th by China Business News citing multiple investment bank officials, as China's financial authorities shifted IPO policy to allow and support listings by loss-making corporations and actual success cases followed one after another, IPO applications from loss-making corporations have increased noticeably.
In response, exchange and investment bank officials agreed that it is not enough for corporations to meet listing requirements, and that there is a growing need to examine corporations' technological strength and growth potential more strictly. China Business News said, "Recently, exchanges have been tightening IPO reviews, and there are observations that they are especially raising the bar for listings by loss-making corporations," adding, "However, the authorities' policy stance has not changed to that extent yet."
◇ authorities lowered the IPO bar for strategic industries
China in recent years has tweaked the system to allow IPOs by loss-making corporations in fields with high growth potential. In June 2024, through the "STAR Market Eight Articles," it supported listings by high-quality nonprofit science and technology corporations; then in June last year, it created the "STAR growth tier" on the STAR Market and resumed applying the "fifth listing standard" for loss-making corporations. This June, it expanded support for listings by loss-making corporations to include artificial intelligence (AI), quantum technology, biomanufacturing, and humanoids (human-shaped robots).
The fifth listing standard is a system that allows listings by corporations that, even if they cannot turn a profit immediately, have a certain level of market capitalization, core technological strength, and marketability. It is a device to bring corporations in strategic industries such as semiconductors and AI—where research and development (R&D) investment is large and it takes a long time to turn profitable—into the capital market.
◇ loss-making corporations flock to the STAR Market
As the listing bar has been lowered, successful IPO cases by loss-making corporations are also increasing. According to Wind, a Chinese market research firm, as of the 27th, a total of 65 corporations have listed while in the red on the Shanghai and Shenzhen markets, with 64 on the STAR Market and one on the ChiNext.
A representative case is the semiconductor corporation "Dapu Microelectronics." Dapu Microelectronics recorded losses for four consecutive years from 2022 to 2025, with accumulated losses of about 1.7 billion yuan (about 347.1 billion won), but succeeded in listing on ChiNext in April this year. Its offering price was 46.08 yuan (about 9,408 won), and on the first day of listing the share price jumped more than 430% to 244.55 yuan (about 50,000 won). Its market capitalization on the first day of listing exceeded 100 billion yuan (about 20.414 trillion won).
In addition, AI Semiconductor corporation Suiruan Technology has recorded an accumulated net loss of 4.339 billion yuan (about 886.1 billion won) over the past three years and is set for an IPO subscription on Sept. 2. Foundry corporation Yuexin Semiconductor is also pursuing a ChiNext listing; Yuexin Semiconductor likewise recorded consecutive losses from 2022 through the first half of 2025.
The main reason China's stock market opened the door to such loss-making corporations is to support capital raising for corporations in strategic industries such as AI, semiconductors, and quantum technology, which take a long time to turn profitable. The problem is that as more corporations apply for IPOs, it becomes increasingly important to distinguish between corporations that simply are not making money and corporations that have future growth potential but have yet to turn a profit.
This is exactly what the local IB industry has been emphasizing lately. A securities firm official told China Business News, "In the end, you have to comprehensively examine corporations' technological strength and growth potential," adding, "If it is difficult for the lead underwriter to judge listing suitability, it can confirm through prior consultation with the exchange before the IPO application, and then another review is conducted at the acceptance stage."