Experts see more funding for innovation

Science, tech enterprises may benefit from anticipated boost to financing

Experts said on Thursday they expect China to accelerate the design and implementation of policy measures to boost financing of innovation-oriented science and technology enterprises, especially smaller firms and startups.

Such moves will bolster the country's pursuit of innovation-driven development, they said, adding it is important that any new policy measures should include steps to motivate banks into funding science and technology enterprises, improve the function of venture capital firms and enhance the quality of listed companies.

Their remarks followed a joint meeting of four departments, including the People's Bank of China, the country's central bank, on Monday to strengthen and improve financial support for sci-tech innovation.

Monday's meeting was also attended by senior officials of the Ministry of Science and Technology, the National Financial Regulatory Administration and the China Securities Regulatory Commission. It was held as part of efforts to fully implement the recommendations of the Central Financial Work Conference, which was held from Oct 30 to 31.

The meeting urged the government departments concerned and financial institutions to promptly formulate and carry out measures to increase support for the financing of innovation-oriented science and technology enterprises.

In particular, the meeting asked the institutions concerned to further enhance financial services for two key areas — science and technology projects at the national level and science and technology enterprises that are small and medium-sized. It also asked them to initiate special programs to ensure financial services bolster those areas.

"Innovation is becoming a driver of China's economic development. Better financial support can unleash domestic innovation vitality and facilitate breakthroughs in core technologies," said Zhou Maohua, a researcher at China Everbright Bank.

Zhou also said the financial services industry needs to focus on the real needs of innovation-oriented enterprises so that they could successfully design new products.

This is important as the country is trying to further develop a multi-tier capital market system, including bond and equity markets, so that innovation-oriented enterprises can have access to more and differentiated financing channels.

Li Peijia, a senior analyst at Bank of China, suggested the country should promote the development of third-party intellectual property rights review and transfer markets, so that banks can find sufficient motivation to fund innovation-oriented enterprises, given the latter's distinct characteristics like the lack of tangible assets that could be collateral.

The authorities should introduce new mechanisms so that banks could benefit not only from loan interest payments of innovation-oriented enterprises but also directly from their growth, she said.

At the same time, China needs to improve the efficiency of venture capital firms although it is already the world's second-largest venture capital market by scale, she said.

"In particular, government-backed venture capital guidance funds of different regions are supposed to be better coordinated to avoid flocking to same projects or areas, causing waste of resources," she said.

"Besides, it is important to improve the quality of listed companies, crack down on their fraudulent behaviors and better manage major shareholders' paring of their large-scale holdings, to restore investor confidence and improve the financing function of the stock market."

Hua Jiansheng, deputy general manager of Yihong Precision, a Dongguan, Guangdong province-based manufacturer of smartphone components, said it has become easier for smaller innovation-oriented enterprises to get bank loans. But, financing from equity and bond markets is still difficult for many such enterprises, he said.