Since the implementation of the comprehensive registration-based system in 2023, there has been a certain deviation between the review dynamics and market expectations. This deviation is affected by multiple factors, including performance fluctuations of some enterprises amid economic structural adjustments, as well as regulatory practices that further strictly control quality in promoting the dynamic balance between the investment and financing ends. Enterprises in similar industries generally share common development windows, business characteristics, and review focus areas. Therefore, observing how various industries navigate economic structural adjustments and review cycles from the perspective of major industry categories has certain reference significance for grasping corporate value and expectations.

Looking back at the historical process of the registration-based reform of China's A-share capital market, from the first breakthrough of the STAR Market in 2018 to the advancement of the comprehensive registration-based reform so far, the reform process can be specifically divided into "four steps". The first step was the establishment of the STAR Market and the pilot implementation of the registration-based system, with the first batch of STAR Market companies listed in July 2019; the second step was the completion of the registration-based reform on the ChiNext Board, with the first batch of ChiNext Board companies under the registration-based system listed in August 2020; the third step was the establishment of the Beijing Stock Exchange (BSE) and the simultaneous pilot of the registration-based system, with the BSE officially launched in November 2021; the final step was the comprehensive advancement of the registration-based reform.

On February 17, 2023, the China Securities Regulatory Commission (CSRC) issued the relevant institutional rules for the comprehensive implementation of the stock issuance registration-based system, and supporting institutional rules from stock exchanges, the National Equities Exchange and Quotations Co., Ltd. (NEEQ), China Securities Depository and Clearing Corporation Limited (CSDC), China Securities Finance Corporation Limited (CSF), and the Securities Association of China were released simultaneously. The issuance of the institutional rules for the comprehensive implementation of the stock issuance registration-based system marks the official implementation of the comprehensive registration-based system, which is a major reform involving the overall situation of the capital market.

The registration-based reform, together with the establishment of the Shanghai and Shenzhen Stock Exchanges and the split share structure reform, constitutes a key milestone in China's capital market. All market participants have high expectations for the opportunities brought by this major historical transformation. However, under the background of the comprehensive registration-based system, the deviation between the A-share IPO review dynamics and market expectations has gradually become apparent.

Since June 2023, there have been an increasing number of cases of IPO withdrawals and rejections. In July and August 2023, the Shanghai and Shenzhen Stock Exchanges saw "zero acceptance" of IPO applications, and the time cycle for various listing procedures gradually lengthened. On August 27, 2023, the CSRC publicly stated that it would reasonably control the pace of IPOs and refinancing to promote the dynamic balance between the investment and financing ends, and the A-share IPO market began to enter a period of clear phased tightening. The Shanghai and Shenzhen Stock Exchanges once again recorded two consecutive months of zero IPO applications in October and November 2023.

According to statistics, from January to November 2023, the number of newly accepted IPO enterprises on the Beijing, Shanghai, and Shenzhen Stock Exchanges decreased by 37% year-on-year, the number of listed enterprises decreased by 20% year-on-year, and the fund-raising amount of listed enterprises decreased by 37% year-on-year.

From January 2022 to November 2023, the Shanghai and Shenzhen Stock Exchanges accepted a total of 904 IPO applications, which were categorized into 62 industries according to the CSRC industry classification. Among these, 18 industries had more than 10 applications, accounting for 86% of the total number of applications. The review status and approval rate of major industries are as follows:

Among the aforementioned 904 enterprises, 437 are still under pre-meeting review, 253 have passed the meeting review (including those that have gone through the meeting, submitted registration materials, and obtained registration approval), and 214 have terminated the process due to withdrawal or rejection. The overall review approval rate is 54% (approval rate = number of terminated cases / (number of approved cases + number of terminated cases)).

Three industries — "Manufacture of Computers, Communication Equipment and Other Electronic Equipment", "Manufacture of Special-Purpose Machinery", and "Manufacture of Chemical Raw Materials and Chemical Products" — had 180, 105, and 73 applications respectively, accounting for approximately 40% of the total number of applications. Their review approval rates are around 60%, making them worthy of focused attention and layout.

Sub-industries with significantly lower approval rates than the average mainly include 6 sectors: Software and Information Technology Services (37%), Pharmaceutical Manufacturing (29%), Rubber and Plastic Products (44%), Non-Metallic Mineral Products (27%), Agricultural and Sideline Food Processing (13%), and Ecological Protection and Environmental Governance (40%). Among these, the Software and Information Technology Services and Pharmaceutical Manufacturing industries have a relatively large number of applicants.

In the Software and Information Technology Services industry, there are 25 enterprises under review, 13 approved, and 22 terminated. Terminated enterprises are mainly concentrated in the fields of software development and IT services, mainly due to the presence of some system integration enterprises in this field, as well as enterprises with unclear business models or core technologies and small business scales. In the Pharmaceutical Manufacturing industry, there are 21 enterprises under review, 5 approved, and 12 terminated. This is mainly due to the strengthened compliance review amid the anti-corruption campaign in the medical system and the tightened review standards of the STAR Market for non-profitable or low-profit enterprises such as innovative drug companies.

Considering that the CSRC industry classification is at the category level and fails to reflect the specific application fields of the corresponding enterprises, the number of applications, terminated cases, and relevant situations of enterprises in the top 20 industries by application volume (accounting for approximately 40% of the total number of applications) are listed below according to the iFinD sub-industry classification:

From January 2022 to November 2023, among the 904 enterprises accepted by the Shanghai and Shenzhen Stock Exchanges, 214 have been terminated, with a termination rate of 23.67%.

Among major sub sub-industries, fields such as high-end equipment (semiconductor, photovoltaic, and other special-purpose or general-purpose equipment), auto parts, new energy batteries, and new materials (semiconductor materials, electronic chemicals, chemical products) have a relatively large number of applicants and termination rates lower than the average.

Sub-industries with significantly higher termination rates mainly include integrated circuit design, software development, IT services, chemical preparations, medical equipment, discrete devices, and computer equipment III. Among these, software development and IT services belong to the Software and Information Technology Services industry under the CSRC classification; chemical preparations belong to the Pharmaceutical Manufacturing industry; medical equipment mainly belongs to the Special-Purpose Machinery industry but has characteristics of the medical industry, all of which have been briefly analyzed earlier.

The industry positioning of integrated circuit design, discrete devices, and computer equipment III is consistent with the hard technology sectors encouraged by China's A-share capital market, hence the large number of applications. However, the termination rate in the actual review process is also relatively high. From the perspective of the specific situation of terminated enterprises, the main reason is that although the relevant industries are encouraged by regulatory policies and enterprises in the corresponding business fields are actively applying, there are significant differences in the specific application fields, technological advancement, and business scale of enterprises in various sub-fields. Some applying enterprises operate in sub-markets with fierce competition and lack core competitiveness, and fail to gain sufficient recognition in terms of financial performance and compliance, resulting in review failure or withdrawal.

Under the background of the comprehensive registration-based system, the Main Board, STAR Market, ChiNext Board, and BSE have formed clear sector positioning, and applying enterprises independently choose the applicable sector based on the sector positioning and review practices.

In terms of specific industry requirements, each sector has formulated a clear "negative list" based on actual conditions, and there are also restricted areas in combination with review practices. The STAR Market explicitly restricts fintech enterprises, model innovation enterprises, real estate enterprises, and enterprises mainly engaged in financial or investment-related businesses; the ChiNext Board explicitly restricts 12 industries including agriculture, forestry, animal husbandry and fishery, mining, and electricity, heat, gas, and water production and supply, as well as enterprises in overcapacity industries, preschool education, subject-based training, and quasi-financial businesses; in review practices, the review results of enterprises in the market-circulated "red-light industries" (including food, catering chains, liquor, epidemic prevention, subject-based training, funeral services, religious affairs, etc.) and "yellow-light industries" (including clothing, home furnishings, home decoration, consumer electronics, etc.) clearly reflect such restrictions.

Against the backdrop of relatively limited review resources at present, only technology enterprises that better meet national strategic needs, make breakthroughs in key core technologies, and enjoy high market recognition can more easily gain full recognition.

In addition to clarifying industry encouragement and restriction clauses in the review system, to strengthen sector development and industry-specific review capabilities, the Shanghai Stock Exchange and Shenzhen Stock Exchange have established the Science and Technology Innovation Advisory Committee and the Industry Advisory Expert Database respectively. They have invited authoritative experts, well-known entrepreneurs, and senior investment experts from national ministries and commissions, research institutes, and leading enterprises in the technology industry chain to establish an expert consultation mechanism on matters such as the industry status, technological level, and development prospects of applying enterprises, the development trends of domestic and foreign technological innovation and industrial application, and whether the enterprises conform to the sector positioning.

For Main Board IPO enterprises that have passed the review, the median net profit in the past year is RMB 151.3652 million. The actual approval rate of Main Board IPO enterprises with a net profit of more than RMB 90 million exceeds 60%, while that of enterprises with a net profit of less than RMB 90 million is no more than 40%.

For STAR Market IPO enterprises that have passed the review, the median net profit in the past year is RMB 68.6887 million, and the actual approval rate of enterprises in all net profit ranges is around 40% or lower.

For ChiNext Board IPO enterprises that have passed the review, the median net profit in the past year is RMB 84.7058 million. The actual approval rate of IPO enterprises with a net profit of more than RMB 80 million is approximately 65%, while that of enterprises with a net profit of less than RMB 60 million is lower than 30%.

For BSE IPO enterprises that have passed the review, the median net profit in the past year is RMB 46.1487 million, with an actual approval rate of 60%, and there is little difference in the approval rate among different profit ranges.

Enterprises in the same industry usually face similar or comparable industrial environments, market scales, competitive patterns, and development trends, which are fully reflected in the specific focus areas of IPO reviews. The conventional focus areas in reviews are also among the factors affecting the application and approval situations of different industries.

In the past year, 274 enterprises have gone through the meeting review, and the main review focus, and the main review focus areas are as follows:

Different industries have different development laws, and they have also shown significantly different review trends amid the current economic situation and review practices.

From the perspective of major industry categories, the three industries of "Manufacture of Computers, Communication Equipment and Other Electronic Equipment", "Manufacture of Special-Purpose Machinery", and "Manufacture of Chemical Raw Materials and Chemical Products" have a relatively high proportion of applications and review approval rates. From the perspective of sub-industries, in major tracks — even those closely aligned with review preferences, such as the integrated circuit track — it is necessary to strengthen the screening of specific project targets, fully understand industrial policies and other restrictive factors when selecting targets, and improve the success rate of projects. Sufficient attention should be paid to fields with a relatively large number of applicants and relatively high review approval rates, such as high-end equipment (semiconductor, photovoltaic, and other special-purpose or general-purpose equipment), auto parts, new energy batteries, and new materials (semiconductor materials, electronic chemicals, chemical products).

Under the background of economic structural adjustment and the comprehensive registration-based system, review resources, capital resources, and high-quality project resources remain scarce. Respecting the general laws of industries, review practices, and corporate development is an important cornerstone for navigating cycles. "Fishing by the stream, where the stream is deep, the fish are fat."