China’s A-share market has seen a sharp rise in the number of listed concerns involved with blockchain development, with most of them being enterprises in the financial sector.
Research from Iyiou.com (亿欧智库) indicates that the number of Chinese A-share companies that have made forays into blockchain technology has risen to 70 in total.
Only a small number of these companies are pursuing fully independent blockchain research and development, with the majority instead using cooperative ventures to participate in the technology or investing in blockchain start-ups in order to reduce development costs.
China’s A-share companies are also engaging in strategic cooperation with other firms, establishing joint-entities to engage in research and development, as well as concluding strategic co-operative agreements.
According to Iyiou research most A-share companies involved with blockchain technology are enterprises in the financial sector, while some are also using blockchain-based products for commercial applications.
The sharp growth in A-share companies involved with blockchain technology has triggered heightened regulatory concerns, with a report from Securities Daily indicating that 20 of these companies have received “letters of inquiry” (问询函) from China’s bourses.
The letters have focused in particular on three key areas;
i) Required that listed companies reveal the specific model for their blockchain operations, including application areas and profit models;
ii) Required that listed companies provide detailed explanations of company operations growth, including personnel, technological equipment, investment capital as well as projected revenues;
iii) Warnings about operational risks.
The latest company to receive a letter of inquiry is Shenzhen-listed GRG Banking (广州广电运通), which previously announced on 21 May that it jointly investing in the establishment of Guangzhou Guangdian Yuntong Blockchain Keji Co., Ltd. (广州广电运通区块链科技有限公司) with a trio of other investors, including Beijing Blockchain Cloud Technology Co., ltd. (北京区块链云科技有限公司).
The letter of inquiry issued by the Shenzhen Stock Exchange asked about Guangdian Yuntong’s specific business operations, commercial model, earnings prospects, as well as personnel and capital.
GRG’s response indicated that at present its blockchain operations had not generated any direct operating revenues, but that within the short-term this would not have a material impact upon its business results.
Heightened scrutiny from China’s bourses arrives following warnings from officials and state-owned media about the potential for bubbles to emerge in both blockchain-associated stocks as well as blockchain-powered cryptocurrencies.
In January the Shanghai Stock exchange suspended trading of several shares reportedly involved with the development of blockchain technology, including Cashway Technology, Shanghai Ace and Sichuan Hejia, while the Shenzhen Stock Exchange applied similar measures to 17 of its own listed concerns.