The SEC warned against putting "low quality companies" in IPO: Chinese capital markets are brakeing on tech zeal.

The IPO market in China was clearly warming in 2026, but the regulatory community is beginning to worry about another risk: whether capital markets will once again be crowded with “story-telling” companies. The British Financial Times reported on 10 September that Chinese regulators had recently requested that the investment bank not push large numbers of enterprises with poor quality, lack of strategic value and overvalued, and continued to stress that new stock pricing should be restrained in order to avoid rapid expansion of the market, namely, hair-break, high-level bulks and the technological concept bubble.

This is not a normal window guide, but a clear swing between “support for technology” and “preventing speculation” in China's capital markets. Beijing has continuously requested financial resources to be directed to strategic industries such as artificial intelligence, semiconductors, robots, new energy sources, etc. over the past few years; But when policy preferences and capital-trading are superimposed, a firm can quickly obtain high valuation and market imagination if it labels as “hard technology”. The fact that the chain of custody is now starting to brake is precisely an indication that this pattern has already been reversed.

From Support for Listing to Prove you Not Foams

The scale of IPO financing in China has risen significantly this year. The first day of the boom, which included the storage of long-spring, and the first day of the market, including the launch of the Zhui-Tai-Tai-Tai-Tai, has greatly stimulated the mood of the market. The problem is that the high first-day increase does not equate to healthy markets. It may mean that the price of issuance is being kept low, or that a large amount of money is being concentrated on the subject of scarce technology, which can create short-term speculation.

When a company is listed on the market for the first day of its first day, it is not “how well the market looks”, but whether it is reasonable to issue a system, a pricing mechanism and an investor's risk taking.

Regulatory levels reportedly require more conservative pricing by IIBs and increased demand for continued income, improved profitability and real technological innovation for enterprises to be listed. In the area of human robotics, in particular, the market ' s concern about valuation bubbles and bulk losses was further amplified by the sharp volatility of post-market shares.

The question is not just how the company is quality, but how policy capital is manufactured.

One of the biggest differences between Chinese and United States markets is the apparent policy colour of the listed resources themselves. The sectors that are more easily financed and which have access to local State finance, industrial funds and bank support are largely affected by national industrial strategies. Artificial intelligence, chips, robots are the hot spots of IPOs not only because investors like new technologies, but also because these industries are explicitly included in the policy priorities.

Such a system can rapidly pool resources, but it can also create a dangerous incentive: enterprises are increasingly better at proving that they are “in line with national strategies” rather than first that they have sustainable business models. There is also an incentive for investment banks, local governments and early investors to package companies as “strategicly scarce assets”, as once listed, valuation and exit space may increase significantly.

The bulk is taking on the tail risks of industrialization of policy

Beijing wants more savings from real estate to stock markets, a realistic context: real estate is no longer suitable as the main vehicle for the continued rise in household wealth, and capital markets require long-term financing to support the growth of science and technology enterprises. The problem is that if the quality of the listing is not improving simultaneously, the population simply moves from “buying a house” to “buying a concept stockboard”.

The regulatory hierarchy is currently emphasizing low-value issuance, extended locking and the introduction of State-owned long-term funds into the market, which is essentially to compensate for this risk. Low-priced distribution, however, can only address the first day of the market and cannot replace the real profitability of the enterprise. If the income growth and losses of enterprises are weak after they are listed, the lower issuance prices will eventually face a market revaluation.

That is why the term “low-quality companies” is noteworthy. It is in fact acknowledged that the current IPO screening mechanism is not just a quantitative problem, but that the quality criteria themselves are driven by policy objectives and financing.

Technology cannot be a pass for business commons.

China needs to support science and technology enterprises that have real long-term R&D capabilities, but “strategic importance” does not mean “any valuation is worth it”. A robotic company could have advanced prototypes but might not have stable orders; An AI company can own a popular model without necessarily building up a reliable income; A chip company can receive large subsidies but may still be long-term dependent on policy capital.

Capital markets should ask the proposed companies to answer at least four basic questions:

• Is there a duplicate, sustainable real income rather than a one-time project;
• Whether the losses are narrowed as they expand, rather than the loss of financing;
• Whether core technologies have verifiable barriers rather than policy label packaging;
• Whether local state, industrial funds and related transactions are fully disclosed.

The regulatory level is actually facing a contradiction of its own.

On the one hand, Beijing calls for the financial system to “service new quality productivity” and to allow more capital to enter the science and technology industry; On the other hand, it was concerned about the over-concentration of funds to form a bubble. The need to raise confidence by a large increase in the new stock market is not excessive; Support for rapid financing for strategic enterprises requires strict clearance by the investment bank.

This is the typical contradiction of Chinese-style capital market governance: the executive power creates direction and then attempts to correct the heat with it. After market prices were found to be influenced by policy priorities, the regulatory layer had to re-align temperature through windows, issuance pricing and listing rhythms.

Focus China believes that a truly healthy capital market should not rely on regulators to tell the investment bank “not to send low-quality companies” but should allow information disclosure, audit liability, de-marketing systems and investor litigation to actually increase the cost of forgery and packaging. If a company needs to be valued by policy radial before it is listed, and then it needs to be placed in a regulatory hierarchy to maintain market confidence, then whether it is a market enterprise or a policy project is worth re-scrutinizing.

China's science and technology industry needs capital, but more capital discipline. IPO does not award awards to the National Industrial Strategy, but rather makes enterprises subject to public funding tests. The fact that the regulatory layer is now stepping on the brakes suggests that Beijing is also beginning to realize that if every “hard technology” company is packaged into the future of the country, then it may be investors’ confidence in the market that will break down first.