Make it easier for private enterprises to obtain high-quality financing in the capital market | corporate bonds | capital market
Private economy is a new force to promote Chinese path to modernization and an important foundation for high-quality development. The recently issued "Opinions of the Central Committee of the Communist Party of China and the State Council on Promoting the Development and Growth of the Private Economy" proposes policy measures such as "supporting eligible private enterprises to go public for financing and refinancing", which clearly requires increasing policy support for the private economy and effectively solving practical difficulties.
As an important venue for resource allocation, the capital market has always been an important platform to support private enterprises in direct financing. Experts believe that to promote the development and growth of the private economy, the important role of the capital market should be played well. Various tools such as bonds should be used to meet the diversified financing needs of private enterprises, support more high-quality private enterprises to issue and go public, and promote the growth, optimization, and strength of private listed companies.
Establish a sound financing risk sharing mechanism
In recent years, China's multi-level capital market system has been continuously improved, providing a foundation for direct financing for private enterprises in different development stages and scales. Especially with the establishment of the Beijing Stock Exchange and the implementation of the comprehensive registration system reform, the financing channels for private enterprises have been further opened up.
Data shows that currently, private enterprises have formed an important camp of listed companies, with private enterprises accounting for about 60% of the over 5000 A-share listed companies; Private enterprises raising funds through listing account for nearly half of the total fundraising amount of listed companies; Among the approximately 1000 companies listed under the registration system, private enterprises account for as much as 80%.
However, for a long time, due to weak risk resistance and lack of collateral in some private enterprises, some financial institutions have insufficient willingness to support private enterprise financing. Currently, there is still a lot of room for improvement in the overall financing availability of private enterprises, and financing costs are relatively high. Therefore, the Opinion proposes to establish a market-oriented financing risk sharing mechanism with the participation of multiple parties such as banks, insurance, guarantees, and securities firms.
Dong Zhongyun, Chief Economist of AVIC Securities, said that this is mainly to solve the problem of difficult and expensive financing for private enterprises. Due to limitations in asset size and other factors, some private enterprises face relatively high financing difficulties. Therefore, it is necessary to establish a market-oriented and specialized risk sharing mechanism to reduce financing costs and improve financing efficiency for private enterprises. By establishing a sound market-oriented financing risk sharing mechanism, promoting the formation of the concept of "one prosperity, one loss" among all financing participants, consolidating the responsibilities of all parties, achieving risk diversification and sharing, it helps to eliminate the worries of investors about private economic financing, stimulate the enthusiasm and initiative of financial institutions to support the private economy, and help private enterprises obtain more financing support, improve their financing environment, and promote their development and growth.
"The vast majority of private enterprises are small and medium-sized enterprises. Based on the protection of investors, capital market rules are numerous and strict, and the financing threshold for small and medium-sized enterprises is relatively high, which requires further optimization of the financing mechanism for private enterprises." Tian Lihui, Vice President of Guangxi University and Director of the Financial Development Research Institute of Nankai University, said that raising financing risk funds by all financial institutions involved in supporting the private economy, such as securities firms, is conducive to eliminating the risk losses caused by only a few institutions bearing private economy financing in the past, and stimulating the enthusiasm of financial institutions to support private enterprises. This also means that China has taken a big step towards promoting the development of direct financing, market-oriented financing, and specialized financing for private enterprises.
In fact, as the gatekeepers of the capital market, securities firms are indispensable in serving private enterprise financing. Dong Dengxin, Director of the Institute of Finance and Securities at Wuhan University of Science and Technology, believes that securities firms can provide professional intermediary services for private enterprises, and they are also one of the important institutional investors in the securities market. They play an important role in connecting the past and the future, connecting investment and financing parties, and improving market efficiency in the capital market. Dong Dengxin stated that in order to better help private enterprises solve the problems of difficult and expensive financing, securities firms can provide diversified financing support for private enterprises at different stages of development through various financial instruments such as direct investment, relief funds, and industrial funds in the future. At the same time, securities firms also need to fully leverage the market cultivation function, supervise listed private enterprises to strengthen corporate governance, help and support more high-quality private enterprises to issue and go public, and be good discoverers of value companies.
Improve the financing convenience of private enterprises
The Opinion proposes to support eligible private small and medium-sized enterprises in financing in the bond market, encourage eligible private enterprises to issue technology innovation company bonds, and promote the special support plan for private enterprise bond financing to expand coverage and enhance credit enhancement.
The corporate bond market is an important channel for private enterprises to directly finance, which helps optimize their debt structure and expand financing channels. In recent years, regulatory authorities have continuously improved basic institutional arrangements, lowered the threshold for private enterprises to obtain financing through the bond market, and greatly improved the accessibility of financing for private enterprises.
"Since the beginning of this year, the Shanghai Stock Exchange has further strengthened financing services for private enterprises, injecting new vitality into the issuance of private enterprise bonds through multiple measures such as precise service support for key enterprises, normalized bond roadshows, deepening industry credit support, and strengthening market making in the secondary market construction." The relevant person in charge of the Shanghai Stock Exchange said. In the first six months of this year, the application scale of private enterprise bonds on the Shanghai Stock Exchange increased by 109% year-on-year. High quality private enterprises such as Anta Sports applied for corporate bonds for the first time. Multiple high-quality private enterprises such as Geely Group, Xiaomi Communication, and Sany Leasing successfully issued corporate bonds and public REITs on the Shanghai Stock Exchange to achieve financing, forming a good demonstration effect.
In supporting the technological innovation of private enterprises, the financing needs of private enterprises in the field of science and technology innovation are accurately supported through the use of science and technology innovation bonds and bills. According to data from the Dealers Association, since the launch of sci-tech innovation bills in May 2022, a total of 144 enterprises have been supported in issuing 398 sci-tech innovation bills, with a scale of 341.8 billion yuan. Among them, about 20 private enterprises have issued 77 sci-tech innovation bills, with a scale of 52.52 billion yuan.
"Through multiple efforts, the bond market has achieved significant results in supporting private enterprises," Dong Zhongyun said. However, overall, the proportion of private enterprises issuing bonds for financing is still relatively low. According to statistics, as of August 3rd, the stock size of corporate bonds in the market was 10.9 trillion yuan, of which the scale of corporate bonds of private enterprises was only 309.9 billion yuan, accounting for only 2.84%. It can be seen that there is still significant room for improvement in the support of the bond market for private enterprises.
At the same time, the cost of private enterprise debt financing is relatively high. Dong Zhongyun believes that this is mainly due to the relatively low credit rating of private enterprise entities. According to statistics, only 65% of corporate bonds issued by private enterprises have a rating of AA or above. A lower rating may lead to an increase in the cost of issuing bonds for financing, and bond liquidity may also be affected. Therefore, in the future, further efforts should be made to improve the bond market rating and assist private enterprises in increasing credit.
In addition, to assist more private enterprises in developing and growing through the capital market, the Opinion also explicitly proposes to "support eligible private enterprises to go public for financing and refinancing.".
Tian Lihui believes that the capital market should start from three aspects: clarifying and optimizing regulation, strengthening professional services, and boosting market confidence. Firstly, securities regulation needs to be further optimized to enable private enterprises to clearly understand whether they are eligible and suitable for listing and refinancing; Secondly, it is necessary to implement penetrating supervision, so that the financing of private enterprises can be effectively used for enterprise development, without the problem of profit transmission such as major shareholder plunder; Finally, it is necessary to promote professional institutions such as securities firms to effectively provide professional services to private enterprises, and based on their professional capabilities, carry out governance improvement, financing consulting, and credit compliance work.
Multiple measures focused on addressing weaknesses
In recent years, the capital market has continuously improved service accuracy and increased accessibility, introducing more funds into the private economy. At the same time, there are still shortcomings in the current capital market in supporting private enterprises.
"Due to the small scale and weak financial situation of some private enterprises, it is difficult to meet the financing threshold of bank credit or issuing stocks and bonds, and they require support from the bottom of the multi-level capital market. Currently, the bottom level of the multi-level capital market still needs to be improved, with insufficient coverage and other issues. In addition, financing guarantees are an important means to increase the credit of private enterprises and assist them in financing. However, some financing guarantee institutions have a small capital scale, weak financing guarantee capabilities, and incomplete risk compensation mechanisms, which limit the development and function of the industry.".
Dong Zhongyun suggested that in the future capital market, the entry threshold for private enterprises to go public and issue bonds should be appropriately lowered, and private enterprises should be encouraged to directly raise funds through the capital market. At the same time, efforts should be made to strengthen the infrastructure of the capital market and increase support for inclusive financing services. In addition, we should strongly support the development of the financing guarantee industry, encourage and support private enterprises to use guarantees and other credit enhancement methods to strengthen their financing capabilities, and fully utilize the financing functions of the capital market.
"The 'Opinions' have sent a clear signal to the whole society to promote the development and growth of the private economy, and the capital market has a clearer understanding of the determination of the central government to support the development and growth of the private economy. Tian Lihui believes that the' Opinions' should be used as a work guide, boldly implementing innovation around supporting the private economy, providing services based on the characteristics and endowments of the private economy, and vigorously implementing policies and systems.".
Focusing on the financing needs of private enterprises, the Shanghai and Shenzhen Stock Exchanges have taken a series of innovative measures. For example, the Shenzhen Stock Exchange has promoted the issuance of various bonds and asset-backed securities products by private enterprises, including vigorously promoting the replicable and large-scale development of intellectual property ABS, with a total financing of nearly 22.2 billion yuan, achieving full coverage of patents, trademarks, and copyrights, and helping to connect the "financing, trading, and operation" business chain in the process of creating intellectual property rights for private technology enterprises.
The relevant person in charge of the Shenzhen Stock Exchange stated that they will increase their efforts to serve the private economy, further strengthen the financing support mechanism for private enterprises through product and mechanism innovation, improve the convenience and accessibility of high-quality private enterprise financing, and better serve the national strategy and overall economic and social development.
Of course, the improvement of financing difficulties for private enterprises cannot be achieved overnight, and requires cooperation from multiple parties. For private enterprises themselves, they should also take multiple measures to enhance their financing capabilities. Dong Zhongyun suggested that first of all, "forging iron requires one's own hard work". Private enterprises should continuously improve their corporate governance structure, enhance their profitability and debt repayment ability, and enhance their competitiveness. Secondly, we should actively strengthen our connection with the capital market, enhance business communication with various financial institutions, and fully understand the financial services of the capital market. Once again, it is necessary to strengthen publicity through various communication platforms, enhance the visibility and image of private enterprises in the capital market, and attract more investors to pay attention to and support the development of enterprises.
