Innovate technology financial tools
- Accelerate the construction of a financial platform for science and technology
- Improve social credit environment and further strengthen financial infrastructure
- Constantly regulate capital market and strengthen functions of incentive and restraint
- Further deepen financial reform and innovate mechanisms for policy financing
Financial instruments are the carrier for completing financial transactions. The formation of diversified instruments to meet the needs of science and technology through innovation is an important part of the financial system in supporting independent innovation. In general, accelerating the innovation of China’s science and technology financial instruments mainly includes the following aspects:
Firstly, while further improving mortgage and loan systems and the corresponding technology guarantee system for international property rights, efforts should be made to promote the conversion of guarantee and debt into equity so as to enable creditors to share the benefits brought about by the growth of high-tech enterprises and truly achieve balance between high risk and yield.
Secondly, explore other financial instruments such as SWORDS, which are backed by shares. As an important form of innovation in S&T financial instruments, enterprises that issue SWORDS securities are responsible for managing the use of investments and have the right to acquire all publicly traded securities according to a scheduled price; and investors are given the right to buy option or warrant for the common stock of the enterprise in pre-agreed time and, after a period, can trade separately from the original SWORDS purchased.
Accelerate the construction of a financial platform for science and technology
The x credit system during the transition period is imperfect. The practical problems that scientific and technological enterprises face now mainly include the imperfect mechanism of SMEs in science and technology, low creditworthiness, and short operating history. In this background, we can consider actively improving the role of government in constructing market and organizational credit reporting on the basis of improving the financial system, so as to promote development of financing for scientific and technological enterprises and independent innovation. On one hand, we can encourage and guide the setting up of financial platforms as soon as possible in areas with developed high-tech enterprises but without these platforms, based on improving the technology guarantee and government support mechanisms, so as to create good conditions and enterprise financing. On the other hand, we should enhance the functions of financing platforms for SMEs, actively expand the participants, and promote exchanges and cooperation among banks, high-tech SMEs, guarantee agencies, intermediaries, etc., and expand the service functions and efficiency of platforms, so as to solve the financing bottleneck to the greatest extent.
Improve social credit environment and further strengthen financial infrastructure
In response to the problems of imperfect credit in the process of economic restructuring in China, we should strengthen the financial support system and also strengthen the integrity of the whole society and related infrastructure construction. For example, we must speed up the construction of a social credit system, developing credit rating agencies, record systems, and guarantee institutions, so as to provide banks with a comprehensive information to service technology-based SMEs and promote the formation of a unified national social credit system; we should gradually decrease financial restrictions on market access for financial institutions, promote the development of small and medium-sized banks, and the create conditions for the gradual implementation of mixed operation; we should further improve relevant laws and regulations, cultivate the establishment of social intermediary systems, especially accounting and law firms, as well as S&T ratings institutions and assessment agencies, and form a multi-level commercial guarantee system, mutual assistance guarantee system, and technology assessment system.
Constantly regulate capital market and strengthen functions of incentive and restraint
In addition to improving the system and accelerating innovation in financial instruments, it is crucial to further regulate capital markets. Due to the negative impact caused by institutional defects in the current capital market, a sound financial system should be combined with the normative capital market to jointly promote the development of independent innovation. On one hand, we should speed up the construction of the market system and strength market discipline. We should strictly formulate an information disclosure system of listed companies to further refine unfair competition such as insider trading and price manipulation. We should also effectively safeguard the fairness, equality, and openness of the market, while strengthening supervision, harshly combating illegal disclosure of information such as false information, insider trading, and price manipulation. On the other hand, from the perspective of the supervisor’s management, we should strengthen the construction of enterprise governance mechanisms of listed enterprises and strive to form an effective system of checks and balances and a sound internal control system. In addition, while standardizing the market and strengthening supervision, internal constraints, and market constraints, pilot stock options should be conducted in due course so as to give full play to the incentive role of stock options for managers of S&T enterprises and form an effective incentive and restraint mechanism.
Further deepen financial reform and innovate mechanisms for policy financing
Generally, the earlier the innovation is, the more active it is, and the greater the risks are; the later it occurs, the stronger the technical and economic stability and the less the risks. In the early stages, government financial support was the main priority. However, in stage of accelerating the transformation, the role of the government was mainly guiding support. In the stage of industrialization, large-scale commercial finance was needed. At present, the market mechanism and policy system in China are still not sound enough. There is still a shortage of angel investment and seed investment, which cannot meet the need. In particular, in scientific research projects, we must innovate the models of financial subsidies and carry out reasonable reforms that keep pace with the times, actively explore and develop policy- oriented funds, market-oriented operation, professional management^] and credit amplification, and make better use of policy levers and financial capital more reasonably, so as to promote a deeper integration of innovation and financial innovation.
To this end, we should further accelerate S&T financial reform, including by piloting, promoting, and improving the adoption of non-listed enterprises in the pending share transfer system of securities corporations and other related systems. We should also gradually establish and improve the transfer system between markets at all levels, with an organic multi-level capital market system, and implement first preferential policies for industrial investment funds or equity investment funds. We must establish a loan risk compensation fund for technology-based SMEs, improve the financing guarantee mechanism for them (including the cooperation between policy guarantee and commercial guarantee); encourage banks to increase credit support; establish risk assessment, credit dedication, and a rewards and punishment system suitable for the characteristics of these SMEs with involvement of experts; and carry out pledged loans pilots for intellectual property rights and other intangible assets.