Key Point

Served as a new financial institution, Growth Enterprise Market（GEM）has only appeared and developed for merely 40 years in a relatively long history of financial developments.The creation of GEM expended serving obj ectives of the capital market, made the capital market no longer a patent for large traditional enterprises, but also a financial system and an incubator that can be used by more enterprises which include small-and-medium-sized growth ones, which largely promoted the worldwide emergence of new types of industries.

We think that the establishment and development of GEM enhanced the perfection and upgrading of the whole capital market on resource allocation, risk allocation and wealth creating, and thus boosted the structural transformation of global capital market.But this functional extension also caused more rigorous requirement in its establishment, or easier to fail than traditional capital market，which brought about not only brilliant achievement such as NASDAQ, but also some unsuccessful examples like a flash in the pan.

To China, arguments and debates such as, do we need to build a GEM，what kind of GEM do we need, how to build the GEM, seemed never stopped from the beginning of this century despite the ChiNext market started running and trading formally from October 30,2009.In our view, the uprising of China's finance is the most significant and most magnificent event of global finance in the first 20 years of the 21th century, and the capital market will become a Financial Game playground for the Great Powers.This means, as an important part of the modern multi-level capital market, GEM's establishment and development is a strategic policy deployment based on domestic and world's economic circumstances and from a full range of social and economic development.It will has a deep influence on the sustainable and healthy development of China's capital market and social economy, on the functional division of two exchanges in Shanghai and Shenzheng.But the problem is, with this generally clear target，the ChiNext market is facing with huge challenges of growth and risk:will it continue the brilliant success of NASDAQ, or duplicate the failure of Germany and Japan's GEM, or explore a third developing road？

In our view, although the general construction ideas and functional orientation of the ChiNext market, which was born under a global financial crisis background, is pretty clear:to shoulder the boosting of industrial structure adj ustment, to promote the construction of a self-innovative nation, to further fulfil the historical task of widening the financing channels for high-tech growth enterprises and to pour vigor into a series of growth enterprises successfully, but under the background of present IPO and trading system, corporate governance and lack of delisting mechanism, problems emerged in the market like high P/E ratio, excessive fund-raising, rent-seeking shareholder rush to take share, frequent resigns of senior management and twisted wealth-creating effect etc., which severely affected the market's healthy, sustainable and stable operation.

In our opinion, despite numerous problems which can affect the ChiNext market, but considering factors like rich experience and lessons we have accumulated from China's capital market construction along 20 years; prominent prospect of Chinese economy; implicit demand for structural reform of China's financial market; huge development potential for China's strategic newly-developing industries, especially innovative small-and-medium-sized enterprises; China's development orientation of future global financial center and realistic attitude towards continuing institutional perfection, China has a natural ground and advantages to nurture a GEM, therefore we can expect the ChiNext market's future developments optimistically.

We expect the ChiNext market will be a fair and transparent trading market，this market will guide the continual expanding home and foreign venture capital reasonably, foster true entrepreneur spirit which was based on market competition, encourage the continuation of market innovation spirit, and then become a cradle for China's future leading enterprises and a new growth pole for China's capital market.This is the GEM which we really want and which fit to the rising finance of China.