The GEM board has lowered the entry threshold for enterprises, noted Ni. For a company to be listed on the main board, its share capital cannot be less than 50 million yuan and it should have no less than 1,000 shareholders with stocks of no less than 1,000 yuan in face value. The two conditions for the GEM board, however, are respectively lower at 20 million yuan and 200 shareholders.

The GEM board will not impose a profit requirement on applicants either. The listing requirements are that the company must have been in business for more than 24 months, have been operated by the same management team for more than two consecutive years, have audited tangible assets of 8 million yuan (total assets minus total liabilities and intangible assets, exclusive of the right of land use), have an asset-liability ratio of less than 70 percent, and that its net income from main operations in the latest two accounting years has reached 3 million yuan.

Small hi-tech companies with growth potential, promising products or good business ideas unable to achieve a record of profitability were previously declined entry to these types of financing channels. The GEM board offers them the ticket to enter the security market, said Lu Xing.

Wang Shouren suggested that companies intending to be listed on the GEM board should be those involved in hi-tech and agricultural development, to which the government gives more supportive policies. Wang also encourages enterprises involved in new businesses such as chain stores, e-commerce and transnational operations, and overseas enterprises selling advanced technologies to list on the board.

Applicants rushing in

"The preparation of the GEM board is going smoothly," said Zhang Yujun. "The Shenzhen Stock Exchange has studied the market rules of a GEM board, including offering and listing of shares, information disclosure, and transaction and investor admittance."

Wang Shouren disclosed that although the specific timing for the launch of the secondary board has not yet been confirmed, there are already over 1,000 enterprises preparing to list there.

"The GEM board is a priority for Chinese enterprises planning to list because domestic stock markets enjoy advantages of low costs, while the road show cost, employment cost and material cost in overseas stock markets, as well as the maintenance fee after a company gets listed, are usually much higher," said Xue Xiangdong, President of the Beijing DHC Digital Technology Co. Ltd..

The P/E ratio and funds raised on the domestic secondary board are estimated to be higher than those of overseas markets. Another advantage from listing domestically is that it will save on the effort of becoming familiarized with the related laws and rules of overseas markets. Furthermore, a majority of SMEs have their major customers and potential customers at home. Going public on domestic markets will facilitate efficient communications between the enterprises and their clients, said Xue.

Optimism and skepticism

While trial operations of the secondary board won't begin until the end of this year, stockbrokers are currently accumulating potential listing applicants.

"It is a common scenario now that several brokers are courting the same companies with good performance," said Xu Junhua, Vice President of South Securities. "They are even cooperating with venture capitalists to cultivate companies that don't meet the requirements of the moment, even though the board won't be launched officially until next year."

Xu believes the GEM board is only an avenue to raise funds. It is a market with a low threshold, he said, and it is possibly the most rigorous, selective and promising stock market in China.

"It will be a promising market because it represents the direction of industrialization in the future and also the direction of China's new economy," said Xu, explaining that there are over 70,000 emerging companies and over 20,000 hi-tech companies with certificates granted by relevant Chinese authorities. Only a few of them, the leading ones, will get listed on the GEM board.

"They will ensure a bright future for the secondary board," said Xu optimistically.

While optimism prevails among stockbrokers, few individual stock investors are interested. Cui Yinghong, a stock investor with nine years of experience, explained that the passion for the GEM will soon cool and that individual investors usually put confidence in the main boards supported by a number of large state-owned enterprises (SOEs).

Lu Xing also advised that novice investors should not follow suit to invest in the GEM board because the "price fluctuation there will be much more dramatic than in the main boards."

"It is heaven for speculators, but for newcomers it could be hell since the board will not have asset reorganization backed by the government," added Lu. "On the contrary, it will have a strict elimination mechanism among listed companies."