In response to the issues faced by technology companies in financing, such as lack of collateral, insufficient cash flow, light assets, and difficulty in valuation, the Central Financial Work Conference held last year systematically proposed to do good work in technology finance, green finance, inclusive finance, pension finance, and digital finance for the first time. To empower high-quality development and Chinese-style modernization, the "five major tasks" were included in this year's government work report at the National People's Congress and the National Committee of the Chinese People's Political Consultative Conference. On June 24, General Secretary Xi Jinping reiterated "to do well in technology finance" at the National Science and Technology Conference. Four days later, the People's Bank of China, Ministry of Science and Technology, and other seven departments jointly issued the "Working Plan on Steadily Advancing Technology Finance," clearly defining the implementation path of technology finance. With the implementation of relevant measures, the financing difficulties of technology companies are being gradually solved, and the "soft power" of companies such as technology and intellectual property is increasingly becoming a "hard asset" that banks value when granting credit. ● Text by: Hong Kong Wen Wei Po reporter Wei Chen Ni, reporting from Shanghai Image: Hong Kong Wen Wei Po Shanghai Transmission
Shanghai Lianhe Donghai Information Technology Co., Ltd. (hereinafter referred to as Lianhe Donghai) is an innovative R&D and production company with more than 40% of its staff engaged in research and development, focusing on domestic computer systems and information technology. As a "specialized, refined, distinctive, and innovative" technology-based small and medium enterprise (SME) at the municipal level in Shanghai, Lianhe Donghai won the bid for the renovation project of some tertiary hospitals' intensive care units (ICUs) earlier this year.
Winning the order was originally a good thing, but Lianhe Donghai's senior management was in a dilemma. The company head revealed that the ICU renovation project required a one-time purchase of nearly 3,000 all-in-one machines. The new order disrupted the company's fund usage plan, and even funds for related chip and motherboard procurement were not secured. Moreover, from order production, delivery acceptance, to final payment clearance, the overall capital recovery cycle could take six months to a year or more.
Traditional Credit Evaluation Not Applicable to Tech Companies
To fulfill the order as agreed, credit support is essential, but a new problem has arisen... As a tech company, Lianhe Donghai's office space, production facility, etc., are all leased, making it difficult for a light-asset company to obtain bank credit, as one can well imagine. In fact, due to credit risk control considerations, traditional bank credit evaluations often focus on corporate assets and credit records, with credit funds more willing to flow to large enterprises.
The traditional credit evaluation framework is not applicable to technology companies characterized by light assets, long R&D cycles, and uncertain development prospects. Deng Yu, a specially appointed researcher at the Shanghai Finance and Development Laboratory, stated that the risk rating, collateral, and credit models of technology companies usually have significant differences. Traditional credit tools and products are relatively single, and the coverage of intellectual property and other intangible asset collateral management, credit product innovation, and application is still insufficient, making it difficult to meet the financing needs of small and medium-sized technology companies.
Introducing Innovation Scoring System to Help SMEs Finance
When Lianhe Donghai was in trouble, the Shanghai branch of the Bank of Communications offered a credit product called "Smart Intellectual Property Loan," providing the company with a credit fund of 11 million yuan (RMB, the same below), allowing the company to "no longer wait for a loan."
The Bank of Communications introduced that "Smart Intellectual Property Loan," launched on March 29 this year, is tailor-made for small and medium tech companies, characterized by "online application, automatic approval, borrow and repay at any time, favorable interest rates," etc. With pure credit, a company can obtain a loan of up to 20 million yuan, with a maximum credit period of three years. This product uses a big data model to break the conventional method of "looking at collateral, cash, and assets" when granting credit, and instead focuses on technology companies identified by the Ministry of Industry and Information Technology and the Ministry of Science and Technology, considering the company's intellectual property, R&D capability, and level as important factors for enhancing corporate credit.
Tong Hong, business director of the Bank of Communications and president of the Shanghai branch, stated that tech finance is a business feature and important strategic direction for the Bank of Communications during the "14th Five-Year Plan" period. "We will resolutely do a good job in 'tech finance,' guiding more financial resources to gather in the field of 'hard technology.'" He revealed that in the next stage, they will promote the establishment and improvement of a financial service system highly compatible with achieving high-level self-reliance in science and technology and building a strong nation in science and technology, contributing to Chinese-style modernization.
On April 7, the People's Bank of China established a 500 billion yuan re-loan for technological innovation and technical transformation, of which 100 billion yuan is allocated to support the first loans of early and growth-stage technology SMEs. In addition, the People's Bank of China and the Ministry of Science and Technology, relying on the "Innovation Scoring System" evaluation, selected the first batch of nearly 7,000 eligible companies to recommend to 21 national banks; the evaluation work of the second batch of more than 320,000 companies is also accelerating. Correspondingly, since the beginning of this year, major state banks have successively established tech finance centers at the head office level, and some have even set up tech finance centers and specialty branches in areas with active technological innovation in the mainland.
The "Smart Intellectual Property Loan" product is just a small excerpt in the "tech finance" major task. As more tech finance measures are implemented and innovative tech finance products are launched, the convenience of financing for technology companies has greatly improved. According to data from the National Financial Supervisory Authority, as of the end of June this year, the loan balance of high-tech enterprises nationwide reached 15.3 trillion yuan, a year-on-year increase of 19.5%; among them, credit loans and medium to long-term loans accounted for more than 40%; the balance of intellectual property pledge loans was 234 billion yuan, a year-on-year increase of 38%.
Enhancing Risk Identification and Monitoring
In terms of doing well in the "tech finance" major task, Lian Ping, chairman of the China Chief Economist Forum and president and chief economist of Guangda Chief Industrial Institute, suggests further improving the banking evaluation system for technology companies, providing precise basis and guidance for financial support of technological development through effective assessment of science and technology innovation capabilities and transformation potential. Meanwhile, promote financial institutions to establish professional credit evaluation models for technology companies and introduce more innovative products and services in a targeted manner. In addition, fully utilize innovative technology empowerment, intensify the identification and monitoring of risks in technology companies, improve the timeliness and effectiveness of risk prevention and control, establish tech finance specialized institutions, further improve the credit risk-sharing system for technology-based SMEs, and explore government credit enhancement and risk compensation mechanisms for start-up companies.
Data on Technology Finance
● Over the past five years, loans to tech companies have grown at an average annual rate of 20%, nearly twice the average loan growth rate
● Over the past five years, the average annual growth rates of loans to technology-based SMEs and "specialized, refined, distinctive, and innovative" enterprises were 25% and 18%, respectively, both far exceeding the average growth rate of various loans
● Over the past five years, a total of 860 billion yuan in technology company-related bonds have been issued
● In 2022, the People's Bank of China established two structural monetary policy tools, technology innovation re-lending, and equipment renovation and upgrading special re-lending, leading banks to issue nearly 2 trillion yuan in related loans
● In 2024, a new 500 billion yuan technology innovation and technical transformation re-lending is set up, making tech innovation financial policy tools more refined and precise
● As of the closing of July 19 this year, the Sci-Tech Innovation Board has nurtured 573 "hard technology" listed companies, with a total market value of 5.36 trillion yuan and total IPO financing of 910.8 billion yuan
The Key Points of Solid Work on Technology Finance by Seven Departments
● Institutional Service Capability Building: Comprehensively strengthen the construction of professional capabilities in financial services, support banking financial institutions to build exclusive technology finance organizational structures and risk control mechanisms, and improve internal systems such as performance evaluation, and due diligence exemption
● Technology Companies' Debt Financing:
Establish a green channel for the bond issuance of technology-based companies, promoting debt financing through funding connection, enhancing credit, and rating, etc.
● Technology Companies' IPO Financing:
Enhance the functions of stock, new third board, regional equity market services for technological innovation, and strengthen policy support for cross-border financing of technology-based companies
● Supporting Small and Medium Technology Companies:
Focus on supporting small and medium technology companies, improve credit and insurance products that adapt to the characteristics of tech companies in the start-up and growth stages, deeply promote regional equity market innovation pilots, and enrich the sources of funds and exit channels for venture capital funds
● Building Technology Finance Ecosystem:
Encourage regions to form tech finance alliances, support various financial institutions, science and technology intermediary service organizations, etc., to exchange and cooperate, providing tech companies with "angel investment, venture capital, private equity investment, bank loans, capital market financing" diversified relay financial services
● Technology Finance Infrastructure Construction:
Optimize incentive guidance policy system, improve technology innovation and technical transformation re-loaning, re-loaning for small enterprises, and technology innovation special financial bonds, establish technology finance service effect evaluation mechanism to fully motivate financial institutions
● Construction of Technology Finance Mechanism:
Establish and improve the standard system and statistical system of technology finance, perfect regular investment and financing connections, information sharing, innovation pilots, risk sharing, and prevention mechanisms, enhance the precision and sustainability of financial support
Winning the order was originally a good thing, but Lianhe Donghai's senior management was in a dilemma. The company head revealed that the ICU renovation project required a one-time purchase of nearly 3,000 all-in-one machines. The new order disrupted the company's fund usage plan, and even funds for related chip and motherboard procurement were not secured. Moreover, from order production, delivery acceptance, to final payment clearance, the overall capital recovery cycle could take six months to a year or more.
Traditional Credit Evaluation Not Applicable to Tech Companies
To fulfill the order as agreed, credit support is essential, but a new problem has arisen... As a tech company, Lianhe Donghai's office space, production facility, etc., are all leased, making it difficult for a light-asset company to obtain bank credit, as one can well imagine. In fact, due to credit risk control considerations, traditional bank credit evaluations often focus on corporate assets and credit records, with credit funds more willing to flow to large enterprises.
The traditional credit evaluation framework is not applicable to technology companies characterized by light assets, long R&D cycles, and uncertain development prospects. Deng Yu, a specially appointed researcher at the Shanghai Finance and Development Laboratory, stated that the risk rating, collateral, and credit models of technology companies usually have significant differences. Traditional credit tools and products are relatively single, and the coverage of intellectual property and other intangible asset collateral management, credit product innovation, and application is still insufficient, making it difficult to meet the financing needs of small and medium-sized technology companies.
Introducing Innovation Scoring System to Help SMEs Finance
When Lianhe Donghai was in trouble, the Shanghai branch of the Bank of Communications offered a credit product called "Smart Intellectual Property Loan," providing the company with a credit fund of 11 million yuan (RMB, the same below), allowing the company to "no longer wait for a loan."
The Bank of Communications introduced that "Smart Intellectual Property Loan," launched on March 29 this year, is tailor-made for small and medium tech companies, characterized by "online application, automatic approval, borrow and repay at any time, favorable interest rates," etc. With pure credit, a company can obtain a loan of up to 20 million yuan, with a maximum credit period of three years. This product uses a big data model to break the conventional method of "looking at collateral, cash, and assets" when granting credit, and instead focuses on technology companies identified by the Ministry of Industry and Information Technology and the Ministry of Science and Technology, considering the company's intellectual property, R&D capability, and level as important factors for enhancing corporate credit.
Tong Hong, business director of the Bank of Communications and president of the Shanghai branch, stated that tech finance is a business feature and important strategic direction for the Bank of Communications during the "14th Five-Year Plan" period. "We will resolutely do a good job in 'tech finance,' guiding more financial resources to gather in the field of 'hard technology.'" He revealed that in the next stage, they will promote the establishment and improvement of a financial service system highly compatible with achieving high-level self-reliance in science and technology and building a strong nation in science and technology, contributing to Chinese-style modernization.
On April 7, the People's Bank of China established a 500 billion yuan re-loan for technological innovation and technical transformation, of which 100 billion yuan is allocated to support the first loans of early and growth-stage technology SMEs. In addition, the People's Bank of China and the Ministry of Science and Technology, relying on the "Innovation Scoring System" evaluation, selected the first batch of nearly 7,000 eligible companies to recommend to 21 national banks; the evaluation work of the second batch of more than 320,000 companies is also accelerating. Correspondingly, since the beginning of this year, major state banks have successively established tech finance centers at the head office level, and some have even set up tech finance centers and specialty branches in areas with active technological innovation in the mainland.
The "Smart Intellectual Property Loan" product is just a small excerpt in the "tech finance" major task. As more tech finance measures are implemented and innovative tech finance products are launched, the convenience of financing for technology companies has greatly improved. According to data from the National Financial Supervisory Authority, as of the end of June this year, the loan balance of high-tech enterprises nationwide reached 15.3 trillion yuan, a year-on-year increase of 19.5%; among them, credit loans and medium to long-term loans accounted for more than 40%; the balance of intellectual property pledge loans was 234 billion yuan, a year-on-year increase of 38%.
Enhancing Risk Identification and Monitoring
In terms of doing well in the "tech finance" major task, Lian Ping, chairman of the China Chief Economist Forum and president and chief economist of Guangda Chief Industrial Institute, suggests further improving the banking evaluation system for technology companies, providing precise basis and guidance for financial support of technological development through effective assessment of science and technology innovation capabilities and transformation potential. Meanwhile, promote financial institutions to establish professional credit evaluation models for technology companies and introduce more innovative products and services in a targeted manner. In addition, fully utilize innovative technology empowerment, intensify the identification and monitoring of risks in technology companies, improve the timeliness and effectiveness of risk prevention and control, establish tech finance specialized institutions, further improve the credit risk-sharing system for technology-based SMEs, and explore government credit enhancement and risk compensation mechanisms for start-up companies.
Data on Technology Finance
● Over the past five years, loans to tech companies have grown at an average annual rate of 20%, nearly twice the average loan growth rate
● Over the past five years, the average annual growth rates of loans to technology-based SMEs and "specialized, refined, distinctive, and innovative" enterprises were 25% and 18%, respectively, both far exceeding the average growth rate of various loans
● Over the past five years, a total of 860 billion yuan in technology company-related bonds have been issued
● In 2022, the People's Bank of China established two structural monetary policy tools, technology innovation re-lending, and equipment renovation and upgrading special re-lending, leading banks to issue nearly 2 trillion yuan in related loans
● In 2024, a new 500 billion yuan technology innovation and technical transformation re-lending is set up, making tech innovation financial policy tools more refined and precise
● As of the closing of July 19 this year, the Sci-Tech Innovation Board has nurtured 573 "hard technology" listed companies, with a total market value of 5.36 trillion yuan and total IPO financing of 910.8 billion yuan
The Key Points of Solid Work on Technology Finance by Seven Departments
● Institutional Service Capability Building: Comprehensively strengthen the construction of professional capabilities in financial services, support banking financial institutions to build exclusive technology finance organizational structures and risk control mechanisms, and improve internal systems such as performance evaluation, and due diligence exemption
● Technology Companies' Debt Financing:
Establish a green channel for the bond issuance of technology-based companies, promoting debt financing through funding connection, enhancing credit, and rating, etc.
● Technology Companies' IPO Financing:
Enhance the functions of stock, new third board, regional equity market services for technological innovation, and strengthen policy support for cross-border financing of technology-based companies
● Supporting Small and Medium Technology Companies:
Focus on supporting small and medium technology companies, improve credit and insurance products that adapt to the characteristics of tech companies in the start-up and growth stages, deeply promote regional equity market innovation pilots, and enrich the sources of funds and exit channels for venture capital funds
● Building Technology Finance Ecosystem:
Encourage regions to form tech finance alliances, support various financial institutions, science and technology intermediary service organizations, etc., to exchange and cooperate, providing tech companies with "angel investment, venture capital, private equity investment, bank loans, capital market financing" diversified relay financial services
● Technology Finance Infrastructure Construction:
Optimize incentive guidance policy system, improve technology innovation and technical transformation re-loaning, re-loaning for small enterprises, and technology innovation special financial bonds, establish technology finance service effect evaluation mechanism to fully motivate financial institutions
● Construction of Technology Finance Mechanism:
Establish and improve the standard system and statistical system of technology finance, perfect regular investment and financing connections, information sharing, innovation pilots, risk sharing, and prevention mechanisms, enhance the precision and sustainability of financial support