The current stringent requirements on corporate profitability will be eased to enable innovative startups in tech, bio-tech and high-end manufacturing to apply to be listed before they become profitable if they meet certain standards set by the authorities, according to a notice published by the State Council, China's Cabinet, on Friday. Beijing News comments:

Removing "profitable" from among the compulsory conditions for innovative enterprises is a timely adjustment, as what is important for newly founded enterprises pursuing innovations is not how much profit they make now, but how much profit they might potentially make in the future.

The primary purpose for companies entering the stock market is to secure capital. That only the profitable enterprises are eligible has driven a number of Chinese enterprises to foreign stock markets, where the standards are less restrictive. Alibaba and Tencent, two Chinese IT giants, are both listed in the United States.

But companies producing advanced equipment and artificial intelligence show similar growth curves to these internet enterprises.

During the early development of innovative new products and services, companies make little profit, if the stock market is opened to them, it will be a multi-win scenario: investors will have more opportunities to make longterm investments, and the enterprises needing funds to realize breakthroughs will secure the money they need.

Opening the stock market to more enterprises with promising innovations will inject vitality into the economy, attract more foreign-listed Chinese businesses back, and further reduce the government's interference in the market.

The reform does not mean the stock market's threshold has becomes lower. Instead, it means potential market value and earnings are more important than current earnings when evaluating innovative enterprises.