How does finance support technological innovation? On the Lujiazui Forum, these exchange and bank "big shots" provide answers. China | Innovation | Forum

How can the financial service system support technological innovation? At the third plenary session of the 14th Lujiazui Forum, which opened on June 8th, several financial industry leaders from exchanges, banks, and asset management institutions discussed this topic.

In terms of direct financing, with the implementation of measures such as the comprehensive registration system, the financial market has gradually diversified its support tools for technology innovation enterprises in recent years.

Qiu Yong, Chairman of the Shanghai Stock Exchange, introduced that the Science and Technology Innovation Board has become the most institutionalized sector in China. By the end of May this year, there were 528 listed companies on the Science and Technology Innovation Board, with a focus on high-tech industries and strategic emerging industries. IPO financing reached 820 billion yuan, connecting fundraising, investment, management, and withdrawal, attracting a large number of private equity and venture capital funds to invest in science and technology innovation enterprises, with a total investment of 600 billion yuan. In the past three years, the compound growth rates of operating revenue scale and net profit of enterprises on the Science and Technology Innovation Board have reached 29% and 56%, and the average R&D investment in 2022 has reached 16%.

Nicolas AGUZIN, CEO of the Hong Kong Stock Exchange Group, talked about the new listing regulations for specialized technology companies released by the Hong Kong Stock Exchange a few months ago, which is Chapter 18C. He stated that the advantage of the Hong Kong Stock Exchange lies in the mechanism of the Stock Connect, which is difficult to replicate in other parts of the world. The Hong Kong Stock Exchange will continuously enhance market vitality and quality, increase the variety and selection of investment products related to the new economy, and introduce a series of stable reforms. On this basis, Chapter 18C will become the key to the success of the Hong Kong Stock Exchange in the future, attracting more enterprises, liquidity, investors, and professional services to gather, forming a virtuous cycle.

In terms of indirect financing, in recent years, the domestic banking industry has been continuously strengthening the supply of science and technology innovation finance in response to the characteristics of "two highs and one lightness" for science and technology innovation enterprises.

However, compared to actual financial demand, the current supply of science and technology innovation finance is still relatively scarce. Gu Peng, Chairman of Agricultural Bank of China, first pointed out that there are three major bottlenecks and pain points in improving the efficiency of science and technology innovation financial services: first, technological innovation itself is constantly changing, constantly catalyzing the emergence of new formats and enterprises. The banking industry is always in a catching up state, and it also needs to have knowledge reserves and professional abilities to quickly iterate and update related services in this field. Secondly, commercial banks are inherently cautious, and there is a mismatch between this cautious risk preference and the high risk of technological innovation. Especially in the seed and start-up stages of science and technology innovation enterprise financing, it has the characteristics of high risk and high return, and traditional credit services are difficult to intervene in this type of financing. Thirdly, in further expanding science and technology innovation finance and gathering and integrating various forces, it is necessary to accelerate the construction of a more complete science and technology innovation finance service ecosystem.

In this regard, commercial banks are exploring new evaluation systems for science and technology innovation enterprises. Ji Zhihong, Vice President of China Construction Bank Co., Ltd., gave an example that China Construction Bank is introducing big data analysis methods and expert teams to evaluate the innovation ability of enterprises from multiple perspectives, such as technology transformation ability, R&D investment stability, and intensity, around the core elements of intellectual property. In particular, whether the enterprise has sustained innovation and development capabilities. On this basis, differentiated credit support will be provided to transform intangible assets such as intellectual property into credit, achieving the goal of "not looking at profits but at patents".

Development banks have the characteristic of connecting the government and the market, and can play a unique role in temporary market failures, such as national major scientific and technological tasks with quasi public welfare. Wang Weidong, Vice President of the State Open Bank, stated that the Development Bank will make efforts to expand the coverage of financial services in the future, encouraging financial institutions to provide comprehensive technological innovation services around the entire life cycle of technology enterprises, including basic research, applied research, technology achievement transformation, and technology infrastructure. At the same time, attention should be paid to the sustainability of financial services. It is recommended to use long-term monetary policy tools as support, encourage financial institutions to provide targeted support for technological innovation with low-cost and long-term funds, and guide enterprises to increase investment through a series of measures such as tax incentives, policy subsidies, and risk compensation.

With the deepening of China's financial opening-up reform, foreign asset management institutions are also becoming an important role in supporting domestic science and technology innovation enterprises. On June 8th, it was announced that the sole proprietorship fund had been approved for opening, and Richard KEERS, Chief Financial Officer of Schroder Investment Group, arrived at the conference venue. Richard stated that as an international asset management company, Schroder is very pleased to see China continue its financial reform and opening up, as the reform will become a catalyst for China's technological innovation, such as cross-border flows of venture capital, which can further promote China's technological innovation; The expansion of QFLP can provide financing for early Chinese innovation companies; The mechanism of QDLP can promote Chinese venture capital companies to invest overseas, accumulate overseas experience, and better evaluate Chinese innovative enterprises.