On October 17, 2023, China’s central bank and the Ministry of Science and Technology issued a joint notice aimed at enhancing financial services for technology-focused sectors in key regions such as Beijing, the Yangtze River Delta, and the Guangdong-Hong Kong-Macao Greater Bay Area. The notification emphasizes the need to strengthen financial support for these areas, effectively utilizing structural monetary policy tools like re-lending for technological innovation and technological transformation, as well as increasing loans to tech-oriented enterprises.
This effort aligns with the broader aim of injecting financial resources into technological innovation, as evidenced by a series of policy initiatives rolled out this year. Prior to this announcement, the National Financial Regulatory Administration had issued guidelines to enhance financial services for technology enterprises throughout their lifecycle, encouraging banks and insurance institutions to establish specialized branches in regions with concentrated technology resources to better serve these companies.
The central bank is focusing on key areas crucial for high-quality development, including the establishment of re-lending mechanisms to boost financial support for technological advancements and equipment modernization. This strategy aims to direct credit resources towards critical sectors of the national economy that demand attention.
Recent data shows that as of the end of September, the balance of medium- and long-term loans for the manufacturing sector reached 13.88 trillion yuan, marking a 14.8% increase year-on-year. Notably, loans for high-tech manufacturing grew 12%. Loans for “specialized, refined, and new” enterprises totaled 4.26 trillion yuan, up 13.5%, and inclusive small and micro-enterprise loans reached 32.90 trillion yuan, reflecting a 14.5% increase—all surpassing the growth rates of other loan categories.
Technology companies often face multiple challenges during their growth, including funding shortages, risk management, and market expansion. Industry experts believe that insurance capital, with its long durations and stable sources, is particularly well-suited to meet the financial needs of technological innovation and industrial upgrades, suggesting increased investments in key areas and core technology-related innovative firms.
In August, China Life Insurance signed an all-risk policy with the Advanced Carbon and Energy Materials Laboratory at Tianjin University. A representative from China Life noted that targeted insurance services for laboratory safety had previously been lacking, and this product breaks down traditional barriers in liability insurance, covering all scenarios and risks involved, thereby addressing significant risk management gaps for laboratories and research institutions.
This development is indicative of financial institutions continuously innovating their offerings to better accommodate technological finance needs. Various financial products have been developed to meet the real demands of different tech innovation activities.
Additionally, there is a push to lead in the support of technological innovation. In the southeastern part of Shanghai, the China (Shanghai) Pilot Free Trade Zone Lin-gang New Area, which celebrated its fifth anniversary this year on August 20, represents a key connection between national strategies and urban development. The Lin-gang Economic Development Group, as the main developer of the area, is focused on fostering long-term business growth rather than simply acting as a landlord.
Under the leadership of Jin Lianming, head of Agricultural Bank of China’s Shanghai Free Trade Zone New Area branch, efforts have been made to understand the operational dynamics within the development zone and successfully connect tech companies within the park to necessary funding. For instance, the bank provided 225 million yuan in project loans to support the construction of China’s first automated 12-inch automotive-grade power semiconductor wafer manufacturing center, facilitating advancements in the integrated circuit industry. Additionally, credit of 965 million yuan was extended to establish the world’s first 30,000-liter large-scale mammalian cell production line, addressing critical gaps in biotechnology equipment and technology.
With a series of significant projects being realized, the Agricultural Bank of China’s Shanghai New Area branch has provided over 3 billion yuan in credit to enterprises in the area.
Supporting technological innovation also requires a robust capital market. The Beijing Stock Exchange, China’s youngest securities exchange, recently celebrated its third anniversary. Since its establishment, it has been focused on empowering small and medium-sized enterprises, particularly those driven by innovative capabilities. It supports the listing and development of companies aligned with new production capacity, with over 80% of funds raised by listed companies directed toward green and low-carbon initiatives, the digital economy, advanced manufacturing, and new materials.
According to statistics, more than 90% of companies listed on the Beijing Stock Exchange are high-tech firms, with nearly 80% in strategic emerging industries and advanced manufacturing. More than half are designated as national-level “little giants” for specialization and innovation, with many receiving national awards for technological progress and invention.
Experts suggest that leveraging capital market financing can help break foreign monopolies in key technology fields like new materials and high-end manufacturing while also enabling some enterprises to achieve industry leadership through innovation, thus playing a crucial role in maintaining and strengthening supply chains.
Zhang Xiaojing, director of the Financial Research Institute at the Chinese Academy of Social Sciences, emphasizes the importance of understanding the principles of technological innovation in order to support it effectively. He notes the potential for funding shortages and speculation during the innovative process, highlighting the need for a balanced approach. He advocates for an error-tolerant environment at the micro level, where investment failures are permissible, while allowing macro-level fluctuations and potential bubbles.
