The Study Of Investment Channel For Average Investor Invest In NEEQ

During the Two Sessions of 2016, Zhou Xiaochuan, Governer of the People’s Bank of China, discussed in his article that we should focus on strengthening the multi-level capital market investment function and optimizing corporate debt and equity financial structures, so that the proportion of direct financing and, particularly, equity financing can significantly increase, including the formation of an off-layered and orderly exchange market, with full-range complementary functions and unified rules for the multi-level capital market system. This article is included in the guide booklet of "The CPC Central Committee Recommendations on the 13th Five-Year Plan for National and Social Development."At present, a multi-level market is gradually shaping up, consisting of the main board, the SME board, the GEM, NEEQ and regional equity centers. This 3-board is new and serves as SME share transfer system in the country. It evolved from the original two-network system. The 3-board as a pilot was introduced in China as a crucial element of the OTC market. It complements the main board, the small board, and GEM. It provides a rare but direct financing platform for SMEs and has caught intense attention in the market. Since its introduction, the low liquidity of the 3-bard has been noted as a bottleneck that restricts further development of the 3-board market.The management of China’s security market has introduced the market-maker system as practiced in developed countries to the 3-board market, to some extent resulting in trading improvement, but a considerable gap still exists between NEEQ and the exchange market in developed countries. Currently, the 3-board investors remain stringent, and it severely limits the number of average investors to participate in the 3-board market. If we could attract more investors into the 3-board market, this would bring the obvious benefits of (1) improved liquidity and the consequent prosperity and development of the 3-board market and (2) expanded participation of public investment, with possible optimized allocation of investment structure.As defined in this thesis, an "average investor" refers to an individual whose financial asset is less than 5 million Yuan or to an organization that cannot meet the investment requirements currently set by the 3-board. This thesis investigates how the average investors can leverage the new financial products and opportunities and enter the 3-board investment market.This thesis is organized as follows, with sections 4 and 5 as the core chapters. Chapter 4 discusses factors on how to let the currently restricted average investors invest directly in the 3-board market, by introducing private equity funds, public funds, brokerage and associated management plans, and equity crowd funding investment. Then it analyzes these approaches with emphasis on investment threshold, investment stage, and investment methods. Chapter 5 then introduces the innovative style of average investor invest in the 3-board market by studying the cases of crowd funding investment and introduces the average investors to specific programs for direct investment in the new 3-board, helping them gain proper perspectives ranging from deal structuring to risk management. In addition, the rest of this thesis supports the core chapters with analyses of the multi-level market and comparative analyses of the OTC markets in US, UK, Japan, and Taiwan. It discusses the current state of the art and prominent issues in China’s current 3-board market. We propose solutions for how to involve the average investors and how to lead them to the 3-board market.This thesis research is novel in two aspects, as compared to the existing literature and industry practices. First, taking the perspective to discuss the involvement of average investors in the 3-board market is unique and new. Second, the research dives into equity crowd funding for investment in the 3-board, devoting an entire chapter with thorough analysis of case studies and proposing novel solutions. We hope the result of this research be of value of references to average investors as well as for insightful financial product designers.