China Securities Regulatory Commission said on Saturday that it has approved the country’s first batch of fund that invest in the Beijing Stock Exchange (BSE) benchmark index, paving the way for investors to track the overall performance of the exchange that aim at helping private innovative companies raise capital.

The Beijing Stock Exchange Fund is restricted to qualified investors, E Fund, China Asset Management, GF Fund Management, China Merchant Fund, are among the list of eight asset managers whose index funds have been approved by the securities regulator, according to statements from the China Securities Regulatory Commission (CSRC).

The approval came a week after the Beijing Stock Exchange published the benchmark index or BSE 50 index on November 21.

BSE 50 index is a market capitalization weighted index of 50 leading companies traded on the exchange, public data shows that the overall market capitalization of the benchmark stocks amounted 131.6 billion yuan that account for 71% of the total market capitalization of BSE’s stocks.

The publishing of BSE 50 is part of a series of BSE’s measures designed to lure investors, improve liquidity, beef up investor interests such as cutting trading fees, introducing market making and margin financing.

The Beijing Stock Exchange was set up in September 2021, with 82 companies start trading in the first batch of listings two months later. BSE aims to serve innovative small and medium-sized enterprises (SMEs) that have often struggled to access financing.

The Chinese government defined these SMEs as “little giants,” which are small and often little-known businesses that engage in strategically important sectors such as semiconductors, advanced manufacturing and critical minerals.

Funding support for “little giants” is viewed as critical for China’s economy because it can boost the development of China’s value-added manufacturing, core components and material sectors that fix weaknesses in the domestic supply chain and reduce China’s dependence on foreign technology, the initiative is also part of China’s effort to boost its domestic capital markets while reducing debt levels.

Similar move that boosts China’s domestic capital markets had already been introduced, with Shanghai’s Science and Technology Innovation Board, also known as the Star Market, debuted in July 2020 as China’s answer to Nasdaq. It now lists more than 300 companies.

According to state-owned Economic Daily, “little giants” listed on BSE have an average of 28.7 per cent of their employees working in research and development, compare with the 30 per cent rate for companies listed on Shanghai’s Star Market.

BSE can complement Shanghai’s Nasdaq-style Star Market and the Shenzhen bourse’s ChiNext board of start-ups, and it is a successor of Beijing’s over-the-counter market also known as the National Equities Exchange & Quotations, or NEEQ,

Seventy-one of “little giant” were transferred from NEEQ, which had struggled to attract investors since its formation in 2012 because of the lack of liquidity.

Retail investors, who have at least 500,000 yuan in assets in stock accounts, are eligible to trade shares on the Beijing exchange.

Qualified foreign institutional investors (QFIIs) and approved overseas traders holding the offshore yuan can also buy and sell stocks on the Beijing exchange. As of now, about 85 per cent of companies listed on BSE are private enterprises, while the rest are partly state-owned entities.

It only takes two months for BSE to clear listing applications, compared with three months for Shanghai’s Star Market. Its 30 per cent daily cap on stock movement is more flexible than the 20 per cent allowed on the Star Market and 10 per cent for main board companies in Shanghai and Shenzhen.

According to the Xinhua News Agency, listed companies on the Beijing bourse reported steady revenue growth so far this year despite the COVID-19 resurgence.

Their combined operating revenue totaled 73.21 billion yuan from January to September, up 33.25 percent year-on-year, with net profits reaching 6.93 billion yuan, a year-on-year increase of 19.43 percent.