Chinese Tech Firms Push 'AI Ambition' Through IPOs as Mainland Listings Follow One After Another

After the COVID-19 pandemic worsened the fiscal situation of local governments, China changed its strategy: instead of directly subsidizing advanced tech companies, it now supports fundraising through initial public offerings (IPOs). This is a new model in which companies secure large funds directly by listing on the stock market, while the government indirectly helps foster tech companies. Experts call this the 'IPO subsidy' system and evaluate it as a new driving force for the growth of China's advanced tech companies.

The STAR Market (Kechuangban) offers unusually generous privileges to tech companies seeking listings. It has cut the listing review period, which normally takes about two years, to three to five months, helping companies raise funds quickly. It also allows share prices to surge on the first day of trading without price limits, creating a dynamic market environment similar to the Nasdaq. Moreover, a STAR Market listing itself carries the premium of a 'top brand' endorsed by the state, which raises corporate value.

China is cultivating technology-focused companies through the '1+6 provisions,' an unconventional set of listing conditions. Under these provisions, companies with world-class Chinese core technology can list while disregarding other financial requirements. Even loss-making companies can list, and once their market capitalization exceeds a certain level, they can receive preferential treatment. Six kinds of preferential measures, including shortening the period for inclusion in quality-company indexes to three months, actively support the growth of tech companies.

Share prices of Chinese tech companies have surged to record levels on their first day of trading. ChangXin Memory Technologies (CXMT) rose five-fold on its debut, and Unitree climbed six-fold. This reflects investors' intense interest in innovative tech companies, including a world-class humanoid robot maker that can compete with the United States and Korea, in a market where few notable new listings had appeared since the COVID-19 pandemic. In addition, the small size of the listed companies meant limited tradable shares, which also contributed to the price surges.

The IPO frenzy among Chinese tech companies has been accompanied by record subscription competition and debates over overvaluation. Unitree Robotics, in particular, at one point saw its share price rise by more than 600% intraday. This phenomenon has raised concerns about a bubble stemming from supply-demand imbalances in mainland China's stock market, reflecting overheated investor sentiment.

This is about 70% of SK Hynix's market capitalization. Analysts attribute this explosive growth to a deep affection among Chinese people for their domestic memory and semiconductor industries, as well as a strong 'patriotic investment' dimension toward a key national industry.

CXMT's share of the global DRAM market is still only about 8%, but because foreign investment is restricted, mainland China's market operates largely as a 'domestic league.' In this environment, limited tradable shares and the effect of new listings combine to push share prices up excessively.

The IPOs of Chinese tech companies carry strategic significance beyond simply securing funds. By expanding market capitalization, a 'fundraising expressway' is built that allows companies to raise massive capital, making it easier to secure the funds needed for facility investment and research and development. For example, if CXMT reaches a 10% share of the DRAM market, it could attract roughly 70 trillion won in additional funding that could be immediately invested in expanding semiconductor production lines. This is feared to become a powerful foundation for China to rapidly narrow its technology gap with Korea and others.

China's technology push is expected to continue. YMTC (Yangtze Memory Technologies), which holds a 13–14% share of the NAND flash market, is preparing for a listing by the end of this year or in the first half of next year and has already submitted its documents. Along with it, a range of other advanced tech companies are preparing IPOs in succession, including CQ Taiji, which is growing rapidly in quantum technology after the United States, and Landscape, a space launch company that has succeeded in developing reusable rockets. Their listings are expected to drive large-scale capital inflows across China's technology industry as a whole.

The growth of Chinese tech companies could pose a continuing threat, particularly to Korean companies. Fields such as robotics, quantum, and space are not yet directly competitive, but in memory semiconductors, the pace at which Chinese companies are catching up is very fast. Chinese memory companies that have raised massive funds through this IPO wave and secured further fundraising capacity are likely to narrow existing technology gaps quickly. The threat will therefore persist throughout the semiconductor cycle, and although it is not an immediate crisis, it should be closely watched as a long-term risk.