How can finance provide high-quality services for technological innovation, especially for small and medium-sized technology companies? This was a hot topic at the 2024 Financial Street Forum Annual Conference. Participants at the conference indicated that it is essential to fully leverage the role of bank credit, establish a dedicated credit rating system, and be adept at lending to technology companies; further develop the equity financing market, cultivate and strengthen patient capital, support venture capital to grow and become stronger, and better play the role of "investing early, investing small, and investing in hard technology"; and collaborate with multiple parties to build a comprehensive service platform, focus on the coordination of industrial and financial policies, strengthen the support of the legal environment, and continuously inject development momentum into technology companies.
Strengthening Credit Capacity Building
China's current financing structure is still mainly indirect financing, and bank credit is an important force in financial services for technological innovation. However, technology companies, especially those in the early stages, generally have light assets, high technology, and high growth characteristics, lack of collateral, and cash flow generation often lags behind the output of scientific and technological achievements. Under the traditional credit rating model of banks, these companies find it difficult to meet the credit approval thresholds.
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How to solve the above problems? Participants at the conference believe that the key is to be adept at lending. The urgent task is for banks to study and understand the characteristics of technology companies and build a credit rating system that is suitable for them.
"Being adept at lending means strengthening credit capacity building, being good at discovering and meeting market demands, not only focusing on the needs of the new round of technological revolution and industrial transformation, promoting the reengineering of credit management processes and the transformation of digitalization and intelligentization, but also making good use of flexible and pragmatic traditional methods to achieve in-depth understanding of demands, full-spectrum risk portraits, and efficient process connections." Li Yunze, Director of the National Financial Regulatory Administration, stated.
In specific practice, how to be adept at lending? "Adhere to a professional business model, strengthen refined service supply, create a specialized product matrix, and build an innovative service ecosystem." Huo Xuewen, Secretary of the Party Committee and Chairman of Bank of Beijing, said that the bank has formed a "1+17+N" specialized organization system for technology finance. The head office and 17 branches have established technology finance departments, and 69 technology-featured, specialized branches, as well as 29 specialized, specialized branches for small and medium-sized enterprises with specialized and refined characteristics have been established.
Huo Xuewen believes that it is necessary to build a full-chain, full-cycle, diversified, and relay service system for specialized and refined enterprises, cultivate potential customers such as national high-tech and innovative small and medium-sized enterprises, serve specialized and refined enterprises and manufacturing single-champion enterprises, enrich the practice of stock and debt linkage, and provide full-ladder cultivation services for the development of specialized and refined small and medium-sized enterprises.
Behind the specialized credit products is the exclusive credit rating system for technology companies, which is the core capability of bank credit services for technological innovation. In recent years, many commercial banks have focused on the innovation capabilities and growth potential of enterprises, exploring the use of "technology flow" risk assessment models. Huo Xuewen introduced that Bank of Beijing has optimized the technology finance approval mechanism, established a green channel for credit approval, and improved the approval efficiency of specialized and refined enterprises. At the same time, it has fully cultivated a "focused, professional, expert, and specialized" team of professionals in technology finance and specialized and refined businesses, creating an efficient and coordinated professional service team for the front, middle, and back offices of technology finance.
Cultivating and Strengthening Patient Capital
"Modern technological innovation has a long investment cycle, large amounts of funds, high risks, and a high degree of uncertainty. The demand for financial services is diverse, especially for seed and start-up companies, which rely more on equity financing. Active and dynamic private equity investment and venture capital are very important participants." Pan Gongsheng, Governor of the People's Bank of China, stated that the People's Bank will strengthen communication and collaboration with relevant departments, improve the policy system for financial support of technological innovation, focus on cultivating a financial market ecosystem that supports technological innovation, and continuously enhance the ability, intensity, and level of financial support for technological innovation."The capital market plays a pivotal role in the financial system, affecting the whole with the slightest movement. It has a unique and critical role in promoting the formation of innovative capital, aiding industrial transformation and upgrading, improving social wealth management, and stabilizing social psychological expectations," said Wu Qing, Chairman of the China Securities Regulatory Commission (CSRC).
In recent years, China's capital market's ability to serve technological innovation has been continuously enhanced. On one hand, a multi-level capital market system has gradually taken shape. On the other hand, venture capital has ushered in a period of development opportunities. The State Council has successively issued several opinions and policy measures, such as "Several Opinions on Promoting the Continuous and Healthy Development of Venture Investment" and "Several Policy Measures for Promoting the High-Quality Development of Venture Investment," to support the growth and strengthening of venture capital.
Equity financing, characterized by risk sharing and profit sharing, is more aligned with the high-risk, high-return features of technological innovation. Zhou Guihua, Chairman of the Beijing Stock Exchange (BSE), stated that in response to the characteristics of innovative small and medium-sized enterprises (SMEs), the BSE has designed a diversified listing standard and has become an important platform for supporting SMEs to follow a path of specialization, refinement, uniqueness, and innovation. To date, the BSE has a total of 254 listed companies, with more than half being national-level "little giants" of specialization, refinement, uniqueness, and innovation. Each company has an average of 22 invention patents and an average R&D intensity of nearly 5%, which is about three times the average level of large-scale enterprises. Over 80% of the companies achieved profitability in the first half of this year.
Zhou Guihua introduced that currently, nearly 90% of the listed companies on the BSE had the participation of venture capital institutions before going public, with an average of 4 venture capital institutions involved per company. Venture capital has realized more diverse and convenient exits through the listing and merger and acquisition functions of the BSE.
"To further support the growth and strengthening of new quality productive forces, we will focus on supporting high-quality innovative enterprises, enhance the inclusiveness and adaptability of the system, reform and optimize the issuance and listing system, and implement the newly released 'six merger and acquisition rules' to introduce a batch of typical cases as soon as possible," Wu Qing said. At the same time, efforts will be made to cultivate and strengthen patient capital, make comprehensive use of various tools such as stocks, bonds, and futures, improve the support policies for "raising, investing, managing, and exiting" in venture capital and private equity investment, and guide better investment in early-stage, small-scale, long-term, and hard-tech projects.
Building a Comprehensive Service Platform
Next, how to further improve the financial support system for scientific and technological innovation? Participants at the meeting believe that financial services for scientific and technological innovation should pay more attention to policy coordination, strengthen the support of the legal environment, and continuously enhance the internal growth momentum and core competitiveness of technology-based enterprises.
Liang Zhifeng, Director of the Small and Medium Enterprises Bureau of the Ministry of Industry and Information Technology, said that the next step is to follow the deployment of the Party Central Committee and the State Council, build a mechanism to promote the development and growth of small and medium-sized enterprises, and take multiple measures to carry out financing promotion work for small and medium-sized enterprises.
Specifically, first, adhere to policy guidance, continue to organize and promote the "one chain, one policy, one batch" financing promotion action for small and medium-sized enterprises, strive to establish the second phase of the National Small and Medium-sized Enterprise Development Fund, and promote further "investment in early-stage, small-scale, long-term, and hard-tech"; second, adhere to means innovation, and work with the CSRC to launch the third batch of regional equity market special boards for specialization, refinement, uniqueness, and innovation as soon as possible, providing more localized comprehensive financial services for SMEs with specialization, refinement, uniqueness, and innovation; third, adhere to platform services, build the China Small and Medium Enterprise Service Network well, and make the financing service area a supermarket for inclusive financing and a flagship store for excellent service.
The high-quality development of scientific and technological innovation cannot be separated from the protection of the legal environment. At the "Supporting Small and Medium-sized Enterprises to Take the Path of Specialization, Refinement, Uniqueness, and Innovation to Better Serve the Development of New Quality Productive Forces" forum held on October 18, the BSE, the National Equities Exchange and Quotations (NEEQ), and the Beijing Financial Court signed a memorandum of cooperation. Zhang Wen, President of the Beijing Financial Court, introduced that the Beijing Financial Court has specifically formulated "Several Opinions on Providing Judicial Guarantee for the Deepening of the Reform of the New Third Board and the Establishment of the Beijing Stock Exchange." While legally supporting the listing of specialized, refined, unique, and innovative enterprises and strengthening financial support, it has innovated a dual-track, dual-platform working mechanism for group disputes over securities false statements, better protecting the legitimate rights and interests of small and medium investors and maintaining the stability of the capital market.Zhou Guihua stated that there should be an enhancement of policy synergy, strengthening collaboration with various parties in nurturing specialized and innovative enterprises, expanding patient capital, broadening venture capital exit channels, and fostering a favorable judicial environment. This would promote the aggregation of various advanced production factors towards the development of new qualitative productive forces and gather a strong combined force to support the scientific and technological innovation of small and medium-sized enterprises.