Interpretation of the 2024 Delisting New Rules and Guide to Risk Avoidance

Based on the information obtained through research, I will conduct a systematic analysis from four dimensions: core points of the 2024 delisting new rules, delisting risk identification methods, in-depth analysis of the *ST Tianwei (actual *ST Tianze, 603721.SH) case, and risk avoidance strategies.

On April 12, 2024, the State Council issued the new “Nine Policies of the State”, and the China Securities Regulatory Commission (CSRC) released the supporting document Opinions on Strictly Implementing the Delisting System. The Shanghai and Shenzhen Stock Exchanges revised and implemented the new delisting rules simultaneously on April 30, 2024 [1][2].

The new rules improve the four-type forced delisting indicator system [2][3]:

1. Financial Category
   : Negative net profit and revenue below RMB 300 million (Main Board), negative net assets at period-end, non-standard audit opinion
2. Trading Category
   : Closing total market value below RMB 500 million (Main Board) for 20 consecutive trading days, closing price below RMB 1 for 20 consecutive trading days
3. Compliance Category
   : Uncorrected major errors/false records in financial reports, failure to disclose annual reports on schedule, consecutive non-standard internal control audits, unrectified fund occupation by major shareholders
4. Major Illegal Category
   : Financial fraud (1 year of fraud amount ≥ RMB 200 million and accounting for ≥30%; 2 years of fraud amount ≥ RMB 300 million and accounting for ≥20%; 3 consecutive years of fraud)

According to the Stock Listing Rules of the exchanges, investors can quickly identify delisting risks through the following hard indicators [4][5]:

Key Data Check Points

: In the “Main Financial Indicators” section of the annual report, focus on “Net Profit Attributable to Shareholders of the Listed Company”, “Operating Revenue”, “Net Assets Attributable to Shareholders of the Listed Company”, and “Audit Report Opinion Type” [4].

• Internal control audit report is adverse opinion or disclaimer of opinion
• Main bank accounts are frozen
• Illegal guarantees and fund occupation (large amount and unresolved)
• The board of directors cannot hold meetings and form resolutions normally

• Closing price below RMB 1 for 20 consecutive trading days (face-value delisting)
• Total market value below RMB 500 million (Main Board) for 20 consecutive trading days

Before a company is officially placed under risk warning, the following early warning signals usually appear [4][5]:

According to research results, *ST Tianwei (actual *ST Tianze, 603721.SH) was placed under delisting risk warning by the Shanghai Stock Exchange on May 6, 2025 [1][6].

The *ST Tianwei case fully reflects the core features of the new delisting rules [2][3]:

1. Sharp Increase in Revenue Threshold
   : Main Board threshold raised from RMB 100 million to RMB 300 million, eliminating “shell companies” without sustainable operating capabilities
2. Expanded Loss Assessment Dimensions
   : Added total profit as an assessment dimension to prevent evasion of delisting through “financial tricks”
3. Cross-Application of Audit Opinions
   : Even if financial indicators improve temporarily, the company may still be delisted if the audit report is non-standard

According to iFinD data, as of the end of November 2024, there are 126 ST stocks in A-shares, covering 27 industries, with architectural decoration, computer, pharmaceutical biology, communications, and electronics being the hardest-hit sectors [1].

It is recommended that investors establish the following screening mechanism:

┌─────────────────────────────────────────────────────────────┐
│                    ST/*ST Risk Screening Process            │
├─────────────────────────────────────────────────────────────┤
│  Step 1: Financial Indicator Screening                      │
│  ├─ Revenue < RMB 300 million AND Negative non-recurring net profit (Main Board) │
│  ├─ Net Assets < 0                                          │
│  └─ Non-standard Audit Report                              │
├─────────────────────────────────────────────────────────────┤
│  Step 2: Trading Indicator Screening                        │
│  ├─ Closing Price < RMB 2 (Warning Line)                  │
│  └─ Total Market Value < RMB 1 billion (Warning Line)      │
├─────────────────────────────────────────────────────────────┤
│  Step 3: Soft Signal Screening                              │
│  ├─ Consecutive Loss Years ≥ 3                              │
│  ├─ Frequent Receipt of Inquiry Letters                    │
│  ├─ Frequent Changes of Senior Management/Audit Firms        │
│  └─ Existence of Major Shareholder Fund Occupation or Illegal Guarantees │
└─────────────────────────────────────────────────────────────┘

Investors can obtain data required for risk identification through the following channels [4][5]:

1. Annual Reports/Semi-Annual Reports
   : Main financial indicators, audit report opinion type
2. Exchange Announcements
   : Inquiry letters, concern letters, regulatory letters
3. Company Announcements
   : Performance forecasts, risk warning announcements
4. Regulatory Agency Announcements
   : CSRC penalty decisions, corrective order notices

In view of the implementation of the new delisting rules, it is recommended that investors [1][3]:

1. Reduce Allocation Ratio of ST Stocks
   : The value of shell resources has dropped sharply, and investment appeal continues to decline
2. Focus on Company Fundamentals
   : Shift from “shell speculation” to focusing on core business profitability and sustainable operating capabilities
3. Beware of “Doomsday Picking” Risk
   : Funds gradually withdraw from *ST stocks after November each year
4. Focus on Stocks Expected to Remove ST Labels in 2025
   : But need to carefully screen companies that truly have the ability to improve their fundamentals

In 2024, face-value delisting accounted for 73%, and face-value delisting will become more common in 2025 [1]. This indicates:

• Investors sell off inferior companies quickly
• Shell resources continue to depreciate
• The market’s “vote with their feet” mechanism is becoming increasingly effective

The implementation of the new delisting rules marks a fundamental transformation of the A-share market ecosystem. The core for investors to identify and avoid stocks with delisting risks lies in:

1. Focus on Financial Red Lines
   : For the Main Board, pay attention to the combined indicator of “negative net profit + revenue < RMB 300 million”
2. Attach Importance to Audit Opinions
   : Non-standard audit opinions are important risk warning signals
3. Beware of Soft Precursors
   : Inquiry letters, senior management changes, audit firm replacements, etc., are all risk warnings
4. Transform Investment Philosophy
   : Shift from “shell speculation game” to “fundamental investment”

As industry insiders pointed out, the basic function of the delisting system is to promote survival of the fittest in the market and realize optimal allocation of resources [1][3]. Investors should adapt to the market development trend and take avoiding delisting risks as the primary consideration in investment decisions.

[1] Wenxuan Finance - “5 Delisting Risk Announcements in One Day, 126 ST Stocks Face the ‘Year-End Test’” (https://www.wenxuan.news/baogao/13146.html)

[2] Zhonglun Law Firm - “How Listed Companies Solve Difficulties Under the New Delisting Rules” (https://www.zhonglun.com/research/articles/53114.html)

[3] Yicai Global - “New Delisting Rules Take Effect During Annual Report Season, A Batch of Companies Warned of Risks Due to Financial Non-Compliance” (https://www.yicai.com/news/102593648.html)

[4] Zhihu Column - “How to Judge Whether a Stock Will Be Classified as ST? What Aspects to Check” (https://zhuanlan.zhihu.com/p/1971243677318874614)

[5] CSRC and Shanghai Stock Exchange Delisting System Investor Education Manual (http://www.csrc.gov.cn/xinjiang/c105515/c2349817/2349817/files/)

[6] Zhongshan Securities - “Announcement on Implementation/Revocation of Delisting Risk Warning for Multiple Listed Companies” (https://3g.zszq.com/ywgg/noticelist)

[7] 21st Century Business Herald - “Focus on 2024 Annual Report Season: Report on A-share Delisting Risks and Resolution Trends” (https://www.21jingji.com/article/20250321/566dfce30d8eb964e8859408dcffeaea.html)

[8] Securities Times Network - “000638 Triggers Forced Delisting Standards! Avoid the Risks, Be Cautious of This Type of *ST Stocks” (https://www.stcn.com/article/detail/3592165.html)