Get the funds out
How is China going to fund its ambitious innovation and tech self-reliance goals?
On Thursday, Zhang Qingsong, a central bank (PBoC) deputy governor, gave some answers at a State Council presser on that very topic.
Some context: China’s bank-dominated financial system has long struggled to direct capital toward up-and-coming tech firms.
- In recent months, policymakers have highlighted the need to tackle this issue through a “virtuous cycle between ‘technology-industry-finance.’”
Zhang laid out an extensive list of priorities to kick that cycle into gear, including:
- Encouraging banks to increase lending to sci-tech enterprises
- Supporting the use of direct financing initiatives like early-stage seed financing, sci-tech innovation bonds, and hybrid securities
- Encouraging the use of intellectual property as collateral
- Creating a special platform for smaller tech companies to issue high-yield bonds
He also highlighted venture capital as a critical piece of the tech finance puzzle, calling for:
- Institutional investors, like insurance and pension funds, to invest in VC funds
- VC firms to strengthen their investment research capabilities
- The expansion of exit channels for VC investors
ICYMI: On July 9, the State Council released its first-ever regulations for the private equity industry, an entire chapter of which was devoted to supporting VC.
Get smart: Oiling the wheels of this virtuous cycle has become a hot topic for policymakers and officials.
- China can't achieve its tech self-sufficiency goals without funding, and reorienting the financial sector to meet that challenge will be a top priority for financial policymakers for the foreseeable future.