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On 30 September, President Xi Jinping delivered an important speech in Zhongguancun, re-emphasizing the significance and urgency of the innovation as a driving force. President Xi gave a comprehensive and in-depth elaboration on the “Five Focuses” such as focusing on promoting close integration between scientific innovation and socio-economic development. While President Xi’s speech is being studied by all social sectors, it bears practical significance to hold this conference themed “promoting science and technology finance” and facilitate cross-sector conversations and discussions on the latest issues of science technology finance. It also presents a great opportunity for us to learn and make progress together.
To implement the innovation-driven development strategy, an appropriate financial supporting system is in need. It has been a growing consensus that developing science technology finance is an important starting point as well as the focal point to establish such a system. As our forum organizer mentioned, “We are in a window period where technology and finance are experiencing an accelerated growth.” During this window period, integration of technology and finance enjoys a wider space, while new mechanisms, new types of business and new products bred from the science technology practice abound and boom.
In 2004, SZSE and the Torch Center or Ministry of Science and Technology jointly launched the growth-assistance roadmap for high-tech SMEs to nurture technology SMEs in high-tech zones as listing resources. With public support and active participation, the program has been running for ten years with continuously-expanded content. It has yielded fruitful results by providing strong support to the establishment and development of the SME board and ChiNext Market. Looking back, even though the concept of “science technology finance” did not exist at that time, the implementation of the roadmap could be regarded as a systemic and in-depth approach of science technology finance relying on capital market. This year, facing emerging opportunities presented by fast-growing science technology finance, we have been considering updating the roadmap to the “2.0 version” in order to meet new requirements of innovation-driven development strategy. Currently the detailed plan of the “2.0 version” is in the process of communication and argumentation. However, in the earlier stage of analysis and argumentation, we have already accumulated some knowledge and judgment regarding the development of science technology finance, which could be applied to the design and implementation of the “2.0 version” in various ways. We would like to take this opportunity to share our thoughts with you, and hopefully receive your comments and suggestions. This will also be our invitation extended to you to join the “2.0 version”.
First, the real economy foundation has solidified, and the science technology finance has huge potential for accelerated development. By surveying high-tech zones and listed companies, we have deeply felt that, the tremendous potential of scientific innovation has been unleashing at an increasing pace. The overall and average strengths of innovative enterprises have increased and emerging industries have gained momentum for a breakthrough. From a demand perspective, it calls for a powerful endogenous driving force to boost the development of science technology finance. On the other hand, perhaps what’s more important is that the spirits of innovation and entrepreneurship have taken roots in our society, especially in the youth. This is exactly the goal and basis for developing science technology finance. Last month, a documentary named “Business Opportunities at the Fingertip” was aired on CCTV. It shows that while developing mobile Internet technology, entrepreneurs, including many young college students, have demonstrated remarkable wisdom and persistence, which is very touching and also bolster our confidence in scientific innovation and science technology finance.
Second, demand in the science technology finance service has become more individualized and diversified; accordingly, our service supply should be more refined and inclusive. Compared vertically, enterprises at different stages of growth and different positions of the industrial links have different appetites for financial service. For instance, while a start-up is hungry of capital support, a listed company may place more emphasis on the highly efficient merger and acquisition platform. In horizontal comparison, enterprises in different sectors may contain different needs. Therefore we should set varied priorities in meeting their needs. For example, securitization is more applicable to environmental conservation industry, but not medical industry. In light of the tendency among companies towards diversified and individualized financial services requirements, SZSE has begun organizing communication and training programs among enterprises since last year. The M&A communication and training program in medical industry held earlier this year was very well received. We are also building the Home for SMEs, hoping to provide an interactive platform enabling intensified communication for enterprises and entrepreneurs.
Third, as market grows with enriched products and increased platforms for science technology finance service, market participants should make concerted effort for a virtuous cycle. To some extent, science technology finance is becoming a relatively independent productive service industry. Banks, securities firms, insurance companies and financial agencies of new forms offer an increasing number of financial products tailored to science technology sector, including credit products, equity products, fixed income products and securitization products. Great expansion is also taking place in M&As, intellectual property trading and other new services. More and more financial platforms are serving the science technology sector, including exchanges, OTC markets, VC markets and incubators with financing functions. Like other industries, expansion of financial market scale goes hand in hand with division of labor, which in turn helps unleash the market potential. However, in order to form a virtuous cycle, cooperation based on division of labor carries great significance. For example, companies’ credit information platform is key infrastructure in promoting the coverage of financial services to science technology sector and enhancing pricing practice of intermediaries. Though market participants have been seeking a joint force for a while, “Information Island” still exists.
Fourth, a good prospect unfolds for solving financial difficulties by technological means, while Internet finance offers opportunities for further development of science technology finance. Internet finance, along with new methods and models of financial data and information processing based on new technologies, drives down the traditional financial transaction cost and brings about new trading methods and risk management means. Relying on the development of Internet finance, financial sector can enhance its serving capacity and inclusiveness, and mobilizing more financial resources to meet the increasingly decentralized and diversified financial service needs in larger numbers. While developing science technology finance, the abovementioned issues have always topped the agenda. Internet finance, which is now in an “emerging and ascendant” trend, offers good solutions. SZSE has been actively engaged in observations and practice of this regard. We are now considering employment of big data technology to tackle problems encountered in market cultivation and market surveillance. Besides, the listing of Alibaba's two microfinance asset securitization products on 18 September is also considered SZSE’s first cooperation with the Internet finance industry. The answer to how far Internet finance can go lies in practice. But what we can do now is to give enough space for Internet finance to grow. Take the amendment to the Securities Law as an example. We should take into necessary consideration Internet financing models such like “crowdfunding”.
Fifth, risks have become more prominent in developing science technology finance, and it is important to enhance our ability of risk allocation and risk management. For scientific innovation and its industrialization in general, it means fast growth and high yield. But for a specific project, it firstly associates with high risk and uncertainty. The fact constitutes a contradiction, which will become more prominent as the number of innovation activities increases and the level of innovation rises. A typical example is that, during the peak of the Internet bubble in the US, i.e., in the year of 2002 when starting a small business was most likely to succeed, only 2-3% venture companies survived with the rest perishing in their infancy. Similar examples can also be easily found in the development of mobile Internet in China. Innovation is a process of trial and error, and errors take costs. We should increase our tolerance for errors in the process of innovation, while at the same time, improve our risk allocation and risk management ability, thus to reduce the cost of errors and make better use of the limited financial resources. For the capital market, it is a problem which needs to be effectively solved in deepening science technology financial services. I believe this is a problem shared by all of us here.
I wish our meeting a great success, and that everyone learns something new through our communication.
Thank you!
