(Yicai Global) Dec. 19 -- China Railway Construction plans to spin off its high-end equipment unit on Shanghai's board for innovative science and technology firms, likely becoming the first company to leverage new, more relaxed rules being piloted by the country's securities regulator.

China Railway Construction Heavy Industry will list up to 25 percent of its after-issuance equity on the Shanghai Star Market, CRRC said in a statement yesterday. The unit will use the proceeds for research and development, seeking new technology applications, building production bases and topping up its working capital.

CRCC's mainland-listed shares [SHA:601186] climbed on the news, closing the morning session 2.7 percent higher at CNY10.20 (USD1.46) a share.

Companies listed on the Chinese mainland were unable to spin off subsidiaries until Dec. 13, when the China Securities Regulatory Commission brought in trial rules to allow them, provided the parent and child fulfill certain requirements governing related transactions, executive shareholding and profitability, among other criteria.

CRRC founded CRCHI in 2007 to make tunnel bores and other rail transport and specialized equipment. It runs mostly independently from the parent and has remained profitable over the past three years, earning CNY1.6 billion (USD228 million) last year, CNY1.3 billion in 2017 and CNY963 million (USD138 million) in 2016.

The subsidiary can negotiate an over-allotment with the lead underwriter to increase the number of shares issued by 15 percent, but the final proposal will need to be cleared by the regulator, CRCC added.

Editor: James Boynton