As the core of the modern economy, the efficient and healthy operation of the financial system plays an important role in serving the innovative development of the real economy and promoting the transformation of the driving force of the society. Especially when scientific and technological innovation has become a new engine driving global economic development, it is increasingly urgent for China to fully stimulate the vitality of financial factors and make the financial system truly serve scientific and technological innovation.

In the session VII of the 2022 Tsinghua PBCSF Global Finance Forum, the participating scholars and experts from the front-line of China’s high-tech firms shared their views on the difficulties and emergencies of financing innovation, so as to explore the way of economic transformation and upgrading by optimizing the allocation of financial resources to promote innovation. The conference was presided over by Tian Xuan, the associate dean and chair professor of Finance of the PBCSF, Tsinghua University. 

Tian Xuan

Guide capital to long-term, forward-looking projects

During the keynote speech of the session, the former Chairman and President of China Mobile, the president of the China Association of Listed Companies, Mr. Wang Jianzhou said that currently, the global economy suffered the serious challenge of deglobalization, However, the digital transformation accelerated its pace to get deeper and has become the core of the development of science and technology. Based on this, Wang put forward suggestions for how to better support the development of science and technology in China. He said that more patient capital is needed especially for our country’s shortboard such as chip manufacturing and operating system. In particular, we need to forge the ability of the financial market to support the so-called “elephant” firms with huge initial investments, slow development, high needs for additional finance, and have long development cycle.

Wang Jianzhou

Wu Xiaoqiu, the former vice president of the Renmin University of China and the president of China Capital Market Research Institute, also pointed out that with the progress of technology and the change in economic development patterns, technological progress and technological innovation have become the core driving force of cross-cycle economic growth. Finance is also changing quietly to adapt to this change. Its core function of creating liquidity has changed from creating money liquidity to creating asset liquidity, which is also the core logic of China’s capital market development.

Wu Xiaoqiu

As for the direction of China’s capital market development in the future, Wu believes that capital should highlight its strategic vision. To succeed in the long run, investors have to make a batch of strategic visions and balance the short-term profit and long-term growth. Capital flow to the chip industry, life science, human society, and the future development of China has a strong supporting role. At the same time, we should take the registration system reform as an opportunity to change the structure of China’s listed companies, highlight the scientific and technological strength of listed companies, and let these enterprises really occupy a leading role in China’s listed companies.

Strengthen the capacity of financial digitization and improve financing efficiency of the small and medium-sized enterprises

As the new force of the national economy and social development, small and medium-sized enterprises (SMEs) are playing an increasingly important role in industrial transformation, technological upgrading, and promoting social stability in China. In response, Huang Yiping, the associate dean of the National School of Development at Peking University, pointed out in his speech that China’s economy has entered a new stage of development, with its growth model shifting from factor inputs in the past to innovation-driven in the future. Therefore, supporting and encouraging the development of SMEs is no longer a simple issue of fairness and universal benefits, but a key issue related to sustainable economic growth.

Huang Yiping

In recent years, under the guidance of policies and regulations of the government, domestic financial support for scientific and technological innovation has been increasing dramatically. However, such projects have low early returns, strong development uncertainty, and long development cycle, the financing difficulties of scientific and technological innovation enterprises, especially SMEs, are still quite prominent. In this regard, Huang suggested that digital technology be used to improve the financial services of direct and indirect financing systems. In the field of indirect financing, big data can be used to optimize credit risk assessment and assist traditional financial institutions in credit decision-making. It can help resolve the concerns faced by traditional financial institutions when serving SMEs that such firms are “difficult in acquiring customers” and “difficult in risk control”. As for direct financing, while we are vigorously building a multi-level capital market, big-tech credit and big-data analysis are used to analyze the performance of the proposed listing and listed enterprises, so as to alleviate the difficulties of evaluating and pricing these high-tech firms.

Return to Hard&Core Technology and the Reconstruction of VC/PE Investment Logic

Venture capital, as a catalyst for innovation and an important engine to promote the development of science and technology, has become a key force in the construction of the new pattern of innovation-driven development in China. Especially under the background of building a unified national market and unimpeded double-circulation pattern in China, venture capital has become a strong support for unimpeded resources flow. The VC industry is facing a new environment and needs to undertake a new mission in the economic transformation and upgrading period. Yan Yan, the founding managing partner of SAIF Investment Fund said that hard and core tech innovation projects are generally characterized by low operating income, high uncertainty, and lack of analogy in the initial stage, therefore their evaluation is significantly more complicated than that of traditional projects. As for changes in the evaluation ecology of innovative enterprises, Yan believes that in the era of mobile Internet, the pricing of innovative enterprises needs to penetrate beyond financial indicators and should introduce more diversified non-traditional indicators to comprehensively measure the enterprise’s value.

Yan Yan

As for the future innovation trends and investment hotspots, Yan said the 5G-driven Internet of everything will become an important technological force driving social progress in the next decade. At the same time, triggered by 5G technology, consumption patterns represented by e-commerce and Internet celebrities may lead the global consumption. Carbon neutrality and "zero-to-one" disruptive innovation will also be investment opportunities.

Industrial software has become a key opportunity for China to move towards an intelligent world

In his keynote speech through online participation, Xu Wenwei, the director of HUAWEI TECHNOLOGIES CO.LTD. reviewed Huawei ‘s exploration of innovation in recent years and shared his understanding of the development trend of the digital economy driven by technology in the future.

Xu Wenwei

Xu pointed out that globalization has entered the 4.0 era with increasing uncertainty arising from the worsening of global liquidity, the weakening of coordination foundation, and the growing sense of national and regional insecurity caused by COVID-19. To make matters worse, the contradiction of the re-division of the technology industrial chain represented by chips in different regions is also becoming increasingly prominent. In this regard, Xu believes that China’s current shortcomings in precision manufacturing and basic software are actually opportunities. To grasp the opportunity, as the factors of production change from the traditional human resources, capital, and knowledge to the current knowledge, software, and data, industrial software will become the "crown pearl" in the innovation transformation of the entire industry. At present, China has recognized the importance of industrial software and introduced a series of policies to support its innovation and upgrading in intelligent manufacturing. In the future, with the influx of more social capital guided by the government, industrial software will achieve unprecedented development.