Distinguished Guests, Ladies and Gentlemen: Fifteen years ago, a regional financial crisis changed the economic development path of Southeast Asian nations. Many countries, including ASEAN countries, sought ways to transform their economic growth model. Their valuable experience accumulated from years of endeavors also sheds light on us. China is exploring a new economic growth pattern to shift from investment-led growth to innovation-driven development. To achieve this transition, we should not only allocate more resources to the innovation sector, but also to cultivate an institutional environment and a social climate that inspires and advocates innovations. On the other hand, we should also form a deep-rooted social foundation and an endogenous power that supports the innovation-driven development. The capital market has an irreplaceable role to play in this process. Firstly we must bring the advantages of direct financing to full play and guide more capital flows toward innovation. Economic transition also means change in capital allocation. Innovation-driven development requires a suitable financial system to mobilize increasing financial resources to invest in innovative sectors. It requires a vibrant capital market to channel a wide range of social capital into the field of innovation in support of emerging industries and economic development. It has become a consensus for many nations. We have gained some experience in this regard. Since we launched the ChiNext Market in October 2009, 355 companies have been listed, mainly from emerging industries such as energy-saving and environmental protection, new energy, new materials, cultural innovation and Internet services. A number of innovative enterprises have experienced tremendous growth, which leads to the booming development in venture capital (VC) and private equities (PEs) sectors. The total number of active VC and PE firms has reached 4,000 with over RMB 1.64 trillion of capital under management. At present, important breakthroughs have occurred in emerging industries such as information consumption, energy saving and environmental protection and health service, where social capital investment has played a significant role over these years. Second we must form a risk diversification and incentive mechanisms to boost entrepreneurship and innovative spirit. Innovation means breaking-up of status quo and reconfiguration of various factors. This not only enables better allocation of capital, but also unleashes innovative power of the entire society. The key element is the emergence of innovative entrepreneurs in large numbers who speed up innovation in enterprises and bring together the innovative factors of the whole society. Economist Joseph Schumpeter even saw emergence of entrepreneurs in large numbers as the only reason for economic prosperity. Consequently, transition to an innovation-driven economic growth model is not simply an economic issue. It requires that we foster a social environment that encourages and protects entrepreneurship. Entrepreneurs are not capable of bearing risks involved in innovation alone even though they possess visions for innovative opportunities and managerial skills to cash in on them. The capital market offers venture capital for entrepreneurs, helps diversify and stimulate entrepreneurship through risk compensation mechanism. This is the unique advantage of the capital market. Third we must build a highly-efficient platform to enable free flow, convergence and restructuring of innovative factors such as technology and talent. Innovation is a process of “trial and error”. It is market-oriented and involves enterprises as major participants. It is a process where innovative factors converge and restructure. Through equity as a link, the capital market provides a highly-efficient platform to enable free flow of innovative factors, optimize their allocation and minimize cost of “trial and error”. We have visited many research institutes and hi-tech companies, only to find that a considerable amount of research findings with attractive market prospects have been shelved in the laboratories. A major obstacle is inadequate entitlement of rights and benefits to scientists and technicians, who thus become less incentivized to commercialize research results. Last November, the China Securities Regulatory Commission (CSRC) and the Ministry of Science and Technology jointly issued Opinions on Support for Recognizing Scientific and Technological Achievements as Capital Investment and Rights to Equity Shares which removed the obstacle. Leveraging on the pricing and trading mechanisms of the capital market, we have broadened the channel for scientific findings to be transformed into productive innovative factors. At the same time, more and more listed companies have recognized that, in order to keep talents, they must build stronger teams, establish strategic partnerships and achieve the synergy on a wider scope. Thus equity incentives have become increasingly important in that it aligns interest of talented employees with that of the company. What’s more, through M&As the capital market makes it possible for companies to obtain innovative resources in a broader range within a shorter period of time. Thus they can conduct innovative activities on a higher level and a wider scale by incorporating what used to bedispersed innovative resources. At present, SME Board- and ChiNext-listed companies are mainly in the categories of emerging industries such as biomedicine, Internet, energy conservation and environment protection. Technology-motivated and talent-motivated acquisitions have become the major M&A types. M&As have already played a critical role in the converging and optimizing allocation of innovative resources. Though China’s economic transition is an arduous task, it may well determine the future of China’s economy. We must mobilize power of all walks of life and tailor-make a multi-tiered capital market for China’s economic transition. It will not only provides strong momentum for China to upgrade its economy led by innovation, but also lays a new foundation for the capital market to continuously enhance its development quality and the ability to deliver returns on capital. We will work together with all social sectors to achieve this goal! Thank you! |
FTSE Mondo Visione Exchanges Index:
Speech By Song Liping, President & CEO Of Shenzhen Stock Exchange At The Fifth China-ASEAN Summit Forum On Financial Cooperation And Development
Date 06/09/2013