China.org.cn | September 12, 2024
Xing Huina:
One last question, please.
Science and Technology Daily:
In recent years, China has continued to strengthen financial support for scientific and technological innovation. What work has been carried out by the NFRA concerning the reform of technology finance? What aspects will be focused on in the next steps? Thank you.
Wang Shengbang:
Thank you, media friends, for your keen interest in scientific and technological innovation. As you all know, China's economy is transitioning from a stage of high-speed development to one of high-quality development. Implementing an innovation-driven development strategy is a crucial focus. Within this overall strategy, sci-tech companies, particularly small- and medium-sized enterprises, play a vital role. Our primary tasks, both now and in the near future, are to further enhance innovation of technology finance, improve the financial sector's ability to serve scientific and technological innovation, and develop a sci-tech financial system that aligns with scientific and technological advancements. The NFRA has earnestly implemented the guiding principles of the third plenary session of the 20th CPC Central Committee and the Central Financial Work Conference. We have strengthened regulatory guidance to encourage banks and insurance institutions to increase their investment in sci-tech enterprises, giving priority to cultivating patient capital and long-term investment. As you all know, sci-tech enterprises have distinctly different characteristics from those in other industries. They are characterized by innovation-driven processes, technology intensity, high-growth potential, extended R&D cycles and high levels of uncertainty. Therefore, traditional financing models cannot fully adapt to their needs. In light of this, the NFRA has undertaken several initiatives.
First, we are improving the technology finance policy framework. The NFRA has issued guidelines on developing technology finance, green finance, inclusive finance, pension finance, and digital finance for the banking and insurance sector. We have also issued a document on technology finance, namely the notice on strengthening full life-cycle financial services for sci-tech enterprises. This notice further optimizes the service mechanism for offering credit loans to sci-tech enterprises, guiding banking and insurance institutions to provide differentiated and targeted financial services to sci-tech enterprises in different industries and at different growth stages. The aim is to continuously improve service efficiency and adapt to the financial needs of different companies. Financial needs encompass both financing and intellectual support, and they vary at different stages of a company's development. A sci-tech start-up may require equity investment initially. During the growth stage, it might need loan financing. Upon reaching maturity, the company may seek more insurance products to hedge against uncertainty and risks.
Second, we are actively developing innovative financial products. We have regulated the development of exclusive financial services such as “loans + outbound direct investment,” technology insurance, and supply chain finance for leading sci-tech enterprises. The NFRA has worked with the National Intellectual Property Administration to implement paperless online registration for intellectual property pledge financing nationwide, facilitating the financing of sci-tech enterprises. We are guiding large banks in conducting intellectual property valuation. This is crucial because registration and valuation are important prerequisites for obtaining financing. Without accurate valuation, loan issuance and financing face challenges. As Mr. Xiao just reported, by the end of June, the loan balance for high-tech companies in China had increased by 20% year on year, and the balance of intellectual property pledge loans had reached 234 billion yuan, up 38% year on year.
Third, we are further leveraging the risk protection capabilities and long-term funding advantages of insurance capital. Sci-tech enterprises inherently face high levels of uncertainty, which naturally aligns with the risk protection function of insurance. By the end of June, insurance companies had provided 6 trillion yuan in insurance coverage for risks associated with various stages of scientific and technological activities, including R&D, industrial application of advances, and application promotion. We have also supported the removal of policy barriers that previously hindered insurance funds from engaging in equity investment and venture capital investment. Some large insurance companies are now actively participating in various funds and equity investments. As of the end of July, long-term equity investments from insurance funds had reached 2.7 trillion yuan.
Fourth, we are improving regulatory incentives for technology finance and enhancing professional service capacities in this sector. Sci-tech enterprises have distinct characteristics: they are often asset-light, have long R&D cycles, and face considerable uncertainties. In the past, when banks assessed creditworthiness, they focused on traditional enterprises' assets and credit history, an approach based on tangible evaluations. This method doesn't suit sci-tech enterprises. To address this, we're working on further improving the credit evaluation system. We're encouraging a shift from the traditional focus on checking financial statements and collateral toward assessing capabilities, products, and future prospects. While traditional credit ratings look backward, credit ratings for sci-tech enterprises need to look forward. We're encouraging banks to develop differentiated credit evaluation systems that align with the operational characteristics of innovative sci-tech enterprises.
Innovative sci-tech enterprises undergo a lengthy process, from developing a single patent or technology to achieving mass production. Consequently, short-term performance evaluations struggle to accurately measure the success of equity investments and loans in this sector. We are encouraging banks to explore relatively longer-term performance assessment schemes, appropriately increase their tolerance for non-performing loans, and establish mechanisms to ensure that those which have fulfilled their duties are not held accountable.
Next, we will earnestly implement the guiding principles of the third plenary session of the 20th CPC Central Committee. With a reform-oriented mindset, we will take profound and practical measures to further advance the implementation of technology finance policies. We will establish comprehensive pilot zones for intellectual property financial ecosystems in areas with active scientific and technological innovation. These zones will provide diversified financial support to enterprises. We will explore the use of financial asset investment enterprises as platforms to expand the scope of equity investment pilot programs. We will investigate ways to raise the proportion of insurance funds that can be invested in venture capital funds. We'll support insurance companies' investments and encourage more insurance funds to act as long-term patient capital in the science and technology sector. We will also facilitate the participation of wealth management companies and other financial institutions in providing technology financial services in accordance with laws and regulations.
Thank you!
Xing Huina:
Due to time constraints, today's briefing is hereby concluded. If you have any questions, you can contact us after the briefing. Thanks to all the speakers and all our media friends.
Translated and edited by Wang Yiming, Wang Qian, Zhou Jing, Huang Shan, Wang Ziteng, Qin Qi, Yuan Fang, Mi Xingang, Zhang Junmian, Liu Caiyi, Yang Chuanli, Li Huiru, Xu Kailin, Wang Yanfang, David Ball, Jay Birbeck, and Rochelle Beiersdorfer. In case of any discrepancy between the English and Chinese texts, the Chinese version is deemed to prevail.