China plans OTC market to help startups raise funds

China's securities regulator is preparing to roll out a new over-the-counter (OTC) equity market, but the plan is still pending official cabinet approval.

According to a Reuters report Wednesday, Guo Shuqing, chairman of the China's Securities Regulatory Commission, said the "new third board" aimed to provide a new financing channel for small, unlisted firms with a focus on high-tech companies.

He added that his agency had submitted the final version of the plan to the State Council--China's cabinet--where it is awaiting final approval. His comments came during a speech on Tuesday at a construction conference, according to Reuters.

The newswire noted that a trial version of the OTC market, based in Beijing's Zhongguancun district, was launched in 2006. It added that this was similar to the Over-the-Counter Bulletin Board in the United States and provided an electronic platform for non-listed companies to raise funds.

The OTC board is one of the latest measures by Chinese policymakers to boost access to credit for China privately-owned small and midsize businesses (SMBs), which are largely shut out from the country's financial system, which is dominated by state-owned banks lending to state-owned companies.

An earlier study had noted that Chinese SMBs were facing greater cost pressures, with cost of labor and raw materials the two largest factors.