"Market cap decline" is becoming more common! The pattern of forced delistings in trading categories is changing.

In recent times, more and more A-share companies have been facing cases that touch the delisting standards based on market capitalization and find themselves in a tight spot with market-cap delisting risk. The number of related cases has even begun to exceed the trend of delisting based on par value. This phenomenon is different from what we saw in prior years, and it has drawn widespread attention in the market.

Several experts, when interviewed by Securities Times reporter, believe that behind the above phenomenon there are multiple factors, including the increase of the main-board market-cap delisting threshold from 300 million yuan to 500 million yuan, and further changes to the market environment under the comprehensive registration-based system. The relevant experts generally affirm that market-cap delisting helps further optimize the ecosystem of the A-share market.

Is the pattern of mandatory delisting by trading categories changing? Market-cap delisting is “making its mark”

The A-share market has already formed a diversified delisting structure. According to the exchanges’ current rules, delisting includes mandatory termination of listing (abbreviated as “mandatory delisting”) and voluntary termination of listing. Among them, mandatory delisting is further divided into several situations, including mandatory delisting by trading category, mandatory delisting by financial category, mandatory delisting by compliance category, and mandatory delisting for major violations. Within the mandatory delisting by trading category, there are also cases such as par-value delisting, market-cap delisting, delisting triggered when trading volume stays continuously below a certain threshold, delisting triggered when the number of shareholders stays continuously below a certain threshold, and so on.

Charting: Hu Huaxiong

It is worth noting that among the A-share market’s mandatory delisting types by trading category, since 2026, market-cap delisting cases have become the mainstream, with the number of cases within the year already exceeding that of par-value delisting.

Looking at the specific situation, *ST Aowei was delisted because its market cap stayed below 500 million yuan for 20 consecutive trading days, and it was removed from the board on March 27, 2026; *ST Jinglun has already locked in market-cap delisting (even if subsequent trading days see consecutive daily limit-up moves, it will still meet the market-cap delisting standard because its market cap remains below 500 million yuan for 20 consecutive trading days); and there are also many companies moving close to the market-cap delisting threshold—for example, as of March 31, *ST Wanfang’s total market cap has stayed below 500 million yuan for 12 consecutive trading days, *ST Yanshi’s market cap has fallen below 600 million yuan and is gradually approaching 500 million yuan. By contrast, since 2026, there have been no instances in the A-share market triggered by the share price staying below 1 yuan for 20 consecutive trading days to cause par-value delisting, which is clearly different from prior years.

Going back to 2018, Zhonghong Shares became the first par-value delisting stock in the A-share market. Since then, par-value delisting cases in the A-share market have emerged at a pace of several to even dozens of companies each year. It was not until September 2024 that *ST Shentian became the first A-share company to be delisted and removed from the board due to triggering the market-cap delisting rules (note: in August 2024, Jianche B was the first B-share company to be delisted and removed from the board due to triggering the market-cap delisting rules). Only then did market-cap delisting cases truly begin to appear in the A-share market, and in that year, the number of par-value delisted companies was several times the number of market-cap delisted companies.

Starting from October 30, 2024, the market-cap delisting threshold for main-board A-share companies on both the Shanghai and Shenzhen exchanges was adjusted from 300 million yuan to 500 million yuan. Since then, market-cap delisting cases have increased further. However, throughout 2025, the number of par-value delisted companies in the A-share market was still higher than the number of market-cap delisted companies, meaning that compared with market-cap delisting, par-value delisting remained the mainstream of mandatory delisting by trading category that year. Until this year, the above pattern has changed noticeably.

Multiple underlying reasons

Regarding the reasons for the above phenomenon, Yu Yang, deputy director of the Institute of Financial Development and State-owned Enterprise Reform of the China (Shenzhen) Institute of Comprehensive Development, and an international investment analyst registered analyst, said in an interview with a Securities Times reporter that the recent rise in the share of market-cap delisting within mandatory delisting by trading category is a concentrated reflection of rigid enforcement of A-share delisting rules, restructuring of market capital flows, and accelerated clearance of low-quality companies. The core reasons mainly fall into four points:

First, the delisting rules are implemented with rigidity, and market-cap delisting becomes the key lever. Under the registration-based system, exchanges strictly enforce the market-cap delisting standards for trading categories. To some extent, this indicator covers a broader range and is more direct in triggering than par-value delisting, gradually replacing part of the par-value delisting and becoming the mainstream;

Second, capital is extremely polarized, and the liquidity of loss-making and poor-performing stocks dries up. Market capital continues to concentrate on high-quality leading companies. Some ST companies, due to shrinking core businesses and continuous losses, are repeatedly sold off by capital, and their market caps quickly fall below the 500 million yuan threshold;

Third, traditional “shell-protecting” approaches fail, and the value of shells becomes zero. With tighter regulation on financial engineering and standstill restructuring used to keep shells alive, some related companies neither have quality asset injections nor can reverse their decline through financial measures, so they can only watch their market caps continue to slide;

Fourth, the demonstration effect is strengthened and risk-avoidance sentiment rises. Strong deterrence formed by market-cap delisting cases such as *ST Aowei accelerates capital withdrawal from some low market-cap companies, further raising the proportion of triggers for market-cap delisting.

Chen Jianhua, a strategy analyst at Yintai Securities, pointed out in an interview with a Securities Times reporter that the increase in the share of market-cap delisting types is the result of both deepening reforms of the delisting system in China’s capital market and the joint effect of optimizing the market ecosystem. On the one hand, after a series of reforms, the A-share market has formed a normalized and diversified delisting structure. After the introduction of the new “Nine Provisions for the Capital Market” in 2024, the delisting standards were upgraded again: the main-board market-cap delisting threshold increased from 300 million yuan to 500 million yuan, further expanding the coverage of market-cap delisting. On the other hand, as the A-share market’s registration-based system is comprehensively implemented and delisting becomes normalized, the scarcity of “shell resources” among listed companies has been greatly reduced. Companies with poor fundamentals have increasingly been discarded by the market as a matter of course. In addition, as a series of foundational systems gradually improve, China’s capital market is shifting toward a mature market model, and the long-term investment and value investment concepts have gained broad recognition. For “zombie companies” with long-term losses and hollowed-out core businesses, investors choose to “vote with their feet,” which directly causes their stock prices and market caps to keep shrinking, ultimately triggering market-cap delisting indicators.

Sui Dong, a researcher at Pingpai Network Wealth, believes that there are two aspects to the rise in the share of market-cap delisting types. On the one hand, the new delisting rules raise the threshold for market-cap delisting, compressing the value of “shell resources,” making this indicator more truly reflect the company’s underlying quality and become an effective tool for clearing out low-efficiency firms. On the other hand, the investor base is optimized: capital continues to shift from “speculating on small-cap and inferior stocks” toward value investing. Companies with poor fundamentals gradually see liquidity dry up, their market caps come under long-term pressure, and they step by step approach the red line for delisting.

Market-cap delisting helps further optimize the ecosystem of the A-share market

The interviewed experts generally affirmed that market-cap delisting plays a role in precisely clearing out low-quality issuers, accelerating market turnover, guiding value investing, and promoting the sustained optimization of the A-share market ecosystem.

In Yu Yang’s view, as an important tool for trading-category delisting, market-cap delisting forms a system-wide “clear-out, guide, constrain, and improve” impact on the A-share market. Specifically, it is mainly reflected in four aspects: first, it precisely clears out low-quality entities, optimizes resource allocation, and directly strips away shell “zombie companies” without ongoing business capability. It directs scarce listed resources and market capital toward high-quality enterprises, helping resolve the dilemma of “driving out good currency with bad.” Second, it corrects the atmosphere of speculation and guides value investing, breaking the inertia of “trading small, trading poor, and trading shells.” The delisting of some related companies helps investors realize that low market-cap companies without performance support will inevitably be eliminated, guiding capital back to fundamentals-based investing. Third, it strengthens company constraints and forces quality improvement. Under market-based delisting pressure, listed companies are pushed to focus on their core business, improve governance, and some companies close to the market-cap delisting threshold need to stabilize their market cap by improving operations and increasing profitability, thereby promoting an upgrade in the quality of listed entities at the root. Fourth, it improves the delisting ecosystem and keeps the market exit channels open. Market-cap delisting complements par-value delisting and financial-category delisting. With cases such as *ST Aowei leading to “delist when they should delist,” it helps the A-share market form a positive cycle of “entering and exiting, and the fittest survive and the unfit are eliminated,” accelerating the transition of the market toward a mature, healthy investment environment.

Sui Dong also believes that the core impact of market-cap delisting on the A-share market lies in strengthening pricing effectiveness and the survival-of-the-fittest mechanism, and its overall effect is positive. First, it improves market efficiency. This system has no grace period—when triggered, delisting occurs immediately. It precisely clears out “shell companies” that have lost the ability to run ongoing operations, accelerating market turnover. Second, it guides the flow of capital. As a clear risk warning, it encourages investors to stay away from companies whose fundamentals deteriorate, concentrates capital on high-quality enterprises, and promotes the spread of value investing concepts. Third, it forces companies to return to value creation. Market-cap delisting sends a signal that “listed status is not permanently guaranteed,” prompting firms to focus on their core business and long-term value, thereby optimizing the market ecosystem from the source.

Chen Jianhua noted that the effectiveness of the market-cap delisting mechanism continues to show, indicating that the results of the new round of delisting-system reforms are clear. It will have a positive impact on the long-term healthy development of the A-share market. On the one hand, it helps promote high-quality development of listed companies. Market-cap delisting will force listed companies to continuously enhance their core competitiveness and strengthen their profitability to pursue development. Those low-quality companies that lose the ability to sustain operations and lack investment value will be removed from the market, which helps improve the overall quality of A-share listed companies. On the other hand, it helps optimize the market ecosystem and protect investors’ rights and interests. A normalized delisting system will greatly reduce the value of “shell resources,” thereby effectively suppressing market speculation on “garbage stocks” and “shell resources,” and promoting the formation of a long-term and rational investment mindset in the market.

Proofread by: Peng Qihua