Editor's note: Shanghai's Sci-Tech Innovation Board, a Nasdaq-style technology board, soared on Monday on the first day of its launch. China Daily writer Li Yang comments:

All 25 stocks on what has been dubbed the STAR Board－13 of which are for information technology companies, five high-end equipment designers and manufacturers, five new materials companies and two in bio-medicine－were driven sharply higher by the market's palpable enthusiasm for the new board.

This is the first time that a registration-based IPO system has been implemented in China since the country piloted its stock market in 1989. If the new board works well, the system is expected to be rolled out in other sections of the market.

The board is a significant market reform that represents an important step forward, not only for the share market, but also the financial sector and the real economy, as it will effectively divert funds to China's cash-thirsty high-tech startups, acting as a bridge between eager investors and fund-hungry innovators.

For a long time, State-owned institutes and enterprises have been the main cradles of innovation in the country, because of the State funds they receive.

Although these innovations have played crucial roles in boosting China's development in certain fields, such as aerospace, aviation, new energy and the high-speed railway industry, the rigidity of the innovation system has been laid bare in the shortage of funds for R&D by private companies and individuals.

The higher-than-expected performance of all of the 25 STAR companies on Monday shows the market's high endorsement of China's plan to use the board to help fund its fast-growing private tech companies, which are expected to become a leading economic growth booster for the country.

But the Sci-Tech Innovation Board may be a double-edged mechanism for investors since as well as high returns, it may also have high risks, as Chinese companies can list without a track record of past profits or restrictions on IPO pricing.

The supervisory department of the stock market should fulfill its duties as watchdog to guarantee the new board is in good order and plays its desired role of encouraging innovation, not speculation.