Current State of and Challenges Facing China's OTC (Third Board) Market

The "Third Board," China's OTC stock market, is still small and illiquid. However, October 2009 sees the establishment of a "Second Board" (or "Growth Enterprise Board") that will fill the gap between the Main Board and the OTC market. We expect the role of the Third Board to become clearer and increasingly important as China seeks to create the "multi-tier capital market" envisaged by the China Securities Regulatory Commission. This paper describes how the OTC market has developed, how it operates, and the rules governing it before going on to consider how it is likely to develop in the years to come