Data released by the high-tech enterprises in the Zhongguancun area showed only 2 percent of these enterprises' total financing came from the capital market in 2005. The rest was raised from private equities, bank loans and private lending.

Wu Xiaoqiu, a professor of finance at the Renmin University of China, said the country lacked a multi-layer capital market for companies of different scale as the country's major bourses in Shanghai and Shenzhen were designed for large companies.

Many small businesses have to look to overseas exchanges. CSRC data showed 195 enterprises from the Chinese mainland had listed on growth enterprises boards in the United States, Britain, Singapore and Hong Kong as of October 2007. Their initial public offerings (IPO) ranged from 1.8 million to 4.1 billion yuan.

The growth enterprise board in China was first proposed more than a decade ago. Since then, the proposal was refined under repeated discussions as the government remained cautious -- fearing too much volatility would expose investors to risks.

In 2004, a mini board, or a trial operation of the current growth enterprise board, was set up at the Shenzhen Stock Exchange to test the waters.

Since May 2004, some 74.3 billion yuan had been raised from the mini board IPOs, comprising 10.96 percent of the total stock market IPOs. However, that is far from enough when compared with the hefty need for money by the nation's critical small businesses.

Ronald Kent, executive vice president of the New York Stock Exchange Euronext, said that precaution was wise, since a healthy capital market was crucial for China's developing economy.

China halted new stock issues in September last year amid the capital market turmoil. Kent expected regulators to tighten requirements for listing considering the outlook in the stock market.

As long as the listed companies showed real concern for investor interests, they could successfully raise money from the stock market despite the bad economy, he said.

Zhang Yidong, chief strategic analyst with the Industrial Securities, said the time was ripe for China to launch the growth enterprise board after 11 years of preparation.

It is imperative for China to restructure its economy amid the global financial crisis. The new board could enhance innovation in small companies, which was in line with the government's macro-economic policy, he said.

However, some analysts fear the launch of the new board would divert money from the two major bourses after it starts operation in May.

"That could be a misunderstanding," said Xu Liangping, senior researcher with the Shenzhen Stock Exchange.

He said only about 30 billion yuan was raised from the mini board in 2007. The new board was expected to draw less in its initial phase.

The CSRC also warned investors of the risks as the performance of those growth enterprises might not be stable. It urged listed companies to disclose information, good or bad, in a timely manner and for investors to be cautious.

(Xinhua News Agency April 2, 2009)