Discussing the Development of Fintech: Promoting the Integration of Technology Innovation and Financial Services
The 2023 Central Financial Work Conference highlighted the importance of developing five major areas of finance: technology finance, green finance, inclusive finance, pension finance, and digital finance. Technology finance, being the first among these, reflects the nation's emphasis on technological innovation.
Against this backdrop, technology finance is flourishing in China. The latest data shows that by the end of June 2024, the loan balance for high-tech enterprises nationwide exceeded 15 trillion yuan, with a year-on-year growth of over 19.5%, which is higher than the overall loan growth rate of 8.8% during the same period. At the same time, financial institutions face practical challenges in investing in sci-tech innovation enterprises, such as the need to iterate risk assessment models, information asymmetry, and insufficient disclosure.
At the "2024 Shanghai Global Asset Management Forum: How Financial Services Can Increase and Expand in Technology," several participants discussed how to better integrate financial services with the innovation and technology industry.
Being patient capital for sci-tech innovation enterprises is a hot topic in writing the big story of technology finance. For different financial institutions, the difficulties and focuses vary. At the roundtable discussion, guests from banks, insurance companies, securities firms, and venture capital firms shared the challenges they encountered in investing in sci-tech innovation enterprises and proposed paths to becoming patient capital for these enterprises.
Advertisement
Zhao Nan, Deputy General Manager of the Corporate Finance Department of Bank of China, pointed out that technology enterprises, due to their high growth, efficiency, and risk characteristics, pose challenges to the traditional bank credit assessment system.
In response, Bank of China has effectively supported the development of technology enterprises by introducing exclusive credit models for technology finance, innovative scoring loan products, and intellectual property pledge financing. Zhao Nan also mentioned that Bank of China has drawn on international successful experiences, such as the capital market-led model in the United States, the bank-led model in Germany, and the government-led model in Israel, in hopes of finding a suitable integration point in the domestic market.
Screening sci-tech innovation enterprises is a new challenge for commercial banks, but for sci-tech investment institutions, it is a field they have been深耕 for many years. Zhu Min, Chief of Sci-Tech Innovation at Shanghai State-owned Capital Investment Co., Ltd., pointed out that Shanghai Sci-Tech Innovation Group screens and supports enterprises with high sci-tech innovation content through parent funds, direct investment, and early contact with technology projects, constantly iterating and updating their understanding of excellent sci-tech innovation enterprises. He emphasized the importance of long-term capital and proposed suggestions to promote the introduction of long-term capital in the venture capital industry and extend the duration of funds.
Being patient capital has become a hot term in investing in sci-tech innovation enterprises. Insurance funds, which have long-term and stable characteristics, naturally have the advantage of becoming patient capital. Chen Zihao, Vice President of China Insurance Investment Company, stated that the insurance industry, from the perspective of the industry or the entire management level, has the conditions to be patient capital. The main features of insurance funds are their relatively long terms and not particularly high return requirements. However, he also mentioned that insurance funds also face regulatory and risk control restrictions. From past practices, insurance funds tend to invest in later rounds, such as C rounds, Pre-IPO, and IPO.
Focusing on sci-tech innovation enterprises themselves, the current difficulty of exiting the primary market has also become a concern for financial institutions. Zhang Lei, a member of the Executive Committee of Huatai United Securities, believes that it is necessary to better serve sci-tech innovation enterprises through technological means and platform tools. He emphasized the importance of information symmetry and risk control and shared the achievements of Huatai Securities in digital transformation and sci-tech innovation services.Fengrui Capital founding partner Li Feng analyzed that the current fundraising, investment, management, and exit phases are all facing challenges, especially the issue of exit mechanisms. He predicted that with the reform of the capital market and the increase in mergers and acquisitions, S funds and other exit mechanisms will gradually become more active in China.
Policy inclusiveness is the key next step
At the scene, five guests proposed suggestions and outlooks for promoting the development of technology finance, all mentioning that policy inclusiveness and continuity are the key to the next step in promoting investment in technological innovation enterprises.
Zhao Nan emphasized the particularity and challenge of technology finance. He called for the establishment of a more inclusive and open policy and regulatory environment, as well as an effective error tolerance and exemption mechanism, to protect the vanguard of innovation and build a comprehensive healthy and positive innovation environment, thereby promoting the high-quality development of national technology finance.
Chen Zihao proposed the importance of the rule of law environment. He believes that a sound and complete rule of law can bring certainty, thereby attracting more capital and funds, making them more patient in investing in technology companies.
Zhang Lei, from the perspective of capital market services, emphasized the importance of forward-looking and inclusiveness. He believes that the capital market should be more proactive in exploring, understanding, and serving technology companies with new quality productivity, helping them to raise the right funds when they need money the most.
Zhu Min and Li Feng once again emphasized the importance of patient capital. Li Feng pointed out that this concept has been mentioned many times in several high-level meetings in the past year. He looks forward to more relevant guidance in the future to match the assessment cycle, error tolerance range, and financial duration and return mechanisms, to ensure that these directions and trends can be actually implemented, bringing benefits to entrepreneurs and the capital market.
Finally, Zhu Min made two suggestions on how to leverage the synergistic effect of technology and capital in Shanghai, this technology finance pilot zone: First, the key to forming a positive cycle is to promote the introduction of long-term capital and the reform of the capital market; second, actively promote the venture capital industry in introducing long-term capital and extending the duration of fund existence.
Leave a Comment