The focus of science and technology finance to help high-quality development

(The author of this article is Zhu Bo, associate professor, School of Economics, Shanghai University)

In July 2024, the Third Plenary Session of the 20th Central Committee of the Communist Party of China deliberated and adopted the Decision of the Central Committee of the Communist Party of China on Further Comprehensively Deepening Reform and Promoting Chinese-style Modernization. The plenary session stressed that in the face of a new round of scientific and technological revolution and industrial transformation, we should comprehensively deepen reform and high-level opening up around the promotion of Chinese-style modernization. In 2024, the two sessions of the 14th National People's Congress put forward the concept and deployment of accelerating the formation of new quality productivity and highlighting high-quality development. The Central Financial Work Conference proposed to optimize the structure of capital supply, vigorously develop science and technology finance, green finance, digital finance, etc., among which, science and technology finance supports scientific and technological innovation; green finance to support green transformation and development; Digital finance improves financial efficiency and effectively supports high-quality development.

1. Pay attention to the three key words of scientific and technological innovation, high-quality development, and Chinese-style modernization

Scientific and technological innovation, high-quality development, and Chinese-style modernization are the three key words of the Third Plenary Session of the 20th CPC Central Committee. The three are interrelated and mutually supportive. Scientific and technological innovation is fundamental, and through scientific and technological innovation, we will promote high-quality development and realize Chinese-style modernization.

The plenary session pointed out that the new development concept should lead the reform, focus on the key points of promoting high-quality development, and improve the incentive and restraint mechanism for promoting high-quality development. High-quality development needs to improve the incentive mechanism, which means encouraging revolutionary breakthroughs in technology, innovative allocation of production factors and in-depth transformation and upgrading of industries to achieve high-quality development. The restraint mechanism for high-quality development means that certain behaviors are restricted, and development behaviors that are not conducive to coordinated, green, open, innovative, and intensive development may be restricted, so as to ensure that high-quality development can be achieved by shaping new momentum and new advantages.

2. Science and technology, finance and industry are the three major supports for high-quality development

First, we need to achieve high-quality development through scientific and technological innovation and technological progress. Second, through the innovative allocation of production factors, high-quality development will be achieved. Third, achieve high-quality development through industrial transformation and upgrading. High-quality development is inseparable from scientific and technological innovation, financial support and industrial development. The capital in the factors of production belongs to the financial category, and the degree of coupling and matching between capital and talents, technology, data and other factors determines whether it can promote high-quality development. The essence of industrial transformation and upgrading is scientific and technological innovation and technological progress, through technological progress, to promote industrial transformation and upgrading, to achieve industrial development in line with the requirements of the times.

In the final analysis, it is necessary to develop scientific and technological innovation and promote scientific and technological progress in the three aspects. The development of scientific and technological innovation is inseparable from the support of finance. In the scientific and technological innovation ecosystem, technology finance plays an important role and provides power support for the scientific and technological innovation ecology. Scientific and technological innovation and green development are important ways to achieve high-quality development, and capital elements are the core elements to support scientific and technological innovation and green development. Science and technology finance focuses on supporting the development of science and technology enterprises and achieving high-quality development.

(1) Science and technology finance solves the market failure problem of capital supply and demand of small and micro science and technology enterprises

It is difficult for small and micro science and technology enterprises to obtain the support of credit funds, coupled with the underdevelopment of mainland venture capital funds, it is more difficult for small and micro science and technology enterprises that need financial support to obtain financial support.

Government guidance funds, such as angel guidance funds and venture capital guidance funds, guide funds to invest early, small, and in science and technology, and support start-up scientific and technological innovation enterprises. Local banks have set up science and technology sub-branches, with separate systems and separate assessments, to more effectively support science and technology enterprises. All localities have set up guarantee funds or guarantee companies to guide banks to lend to small and micro technology enterprises through a risk-sharing mechanism. At this stage, more attention should be paid to how to guide social funds to support small and micro science and technology enterprises, and solve the financing difficulties of small and medium-sized enterprises to a certain extent, so as to increase the stock of small and micro enterprises in scientific and technological innovation.

(2) Science and technology finance provides support for major collaborative innovation projects and major technological research projects

Science and technology finance is not only to solve the problem of market failure of funds, but also to support major collaborative innovation projects and major technological research projects. Major collaborative innovation projects and major technological research projects need to gather resources from all parties to form a joint force, and science and technology finance can play an important role at this time. Science and technology finance supports the development of scientific and technological innovation, promotes scientific and technological progress, and achieves high-quality development. In the financial system of science and technology, equity investment funds, science and technology credit, science and technology insurance and capital markets can all give strong support.

Technology finance is aimed at the whole life cycle of enterprise growth, providing all-round support for technology enterprises at all stages, and creating a technology and financial ecology for the whole life cycle. Focusing on the whole life cycle of science and technology enterprises, science and technology finance provides all-round and multi-level financial services for science and technology enterprises, forming a science and technology finance ecology in which scientific and technological innovation and financial innovation are interdependent and mutually supportive.

(3) Science and technology finance provides support for the development of strategic industries and industrial transformation and upgrading

The in-depth transformation and upgrading of the industry is an important embodiment of high-quality development. The essence of industrial transformation and upgrading is the development of scientific and technological innovation, and science and technology finance will play an important role. Science and technology finance supports and promotes the scientific and technological innovation and development of enterprises, and realizes the transformation and upgrading to higher-level industries.

The essence of supporting green transformation and development is to reduce pollution, improve efficiency, and achieve the goal of sustainable development and high-quality development through scientific and technological innovation and technological progress.

Science and technology finance supports industrial transformation and upgrading by promoting the innovative allocation of various production factors. The integration of capital elements, technology elements, talent elements, and data elements reflects a support for the high-quality development of science and technology enterprises, and realizes the optimal allocation of factor resources, so as to create greater value.

3. The focus of science and technology finance to support high-quality development

(1) Build a regional science and technology financial ecology and promote high-quality development

Fintech is an important driving force for promoting scientific and technological innovation. The key to the development of science and technology finance is to build a science and technology finance ecology. In this ecosystem, the supply side of funds and the demand side of funds work together to build and improve this ecology.

Perspective of capital supply side: improve the efficiency of allocation and optimize the supply structure. Follow market-oriented rules and strengthen the innovative allocation of science and technology financial resources. Through the market mechanism, the endogenous power and innovation vitality of the whole society are stimulated, and the efficiency of resource allocation is optimized and the benefits are maximized. Expand the application scenarios of digital finance and promote the improvement of the service level of the science and technology financial system. Increase the supply of equity investment and optimize the supply structure of science and technology finance. Support the development of science and technology insurance to provide protection for the diversification of risks in science and technology innovation.

Perspective: A variety of optional technology and financial products throughout the life cycle. The financing needs of technology enterprises at different stages can be met to a certain extent; Start-up technology companies can receive more support from venture capital funds; High-quality technology companies have easy access to capital market support.

The government plays a certain role in the construction of the science and technology financial ecosystem, and guides the supply of funds and optimizes the structure of capital supply through government regulations and laws. On the one hand, highlight the importance of strengthening innovation, and on the other hand, clarify the path of supporting innovation, and implement the innovation-driven development strategy through the establishment of institutional mechanisms. In the fintech ecosystem, the public service platform also plays an important role, providing a full range of services for tech innovation enterprises by attracting more institutional cooperation.

(2) Optimize the financing structure, increase the proportion of direct financing, and promote high-quality development

Maintain the compatibility of financial support policies for high-quality development. Combined with the current development situation, optimize the policy support system of science and technology finance, promote the deep integration of scientific and technological innovation, green development and finance, and realize the ecological evolution and sustainable development of industry, technology and finance.

Mainland financing is still dominated by indirect financing, and the proportion of direct financing is relatively low. Reform and improvement should be further strengthened to increase the proportion of direct financing. Equity investment funds are an important force for direct financing, and it is necessary to accelerate the development of equity investment funds, including venture capital funds and private equity funds, to enhance the ability to provide financial services to the real economy.

Reshape the screening and evaluation mechanism of scientific and technological innovation enterprises, including the evaluation of cutting-edge technologies themselves, the judgment of scientific and technological innovation capabilities, the investment in later technology research and development, and the market prospects of technologies, etc., to prevent fake high-tech enterprises, some of which are still in the basic research stage or in the laboratory stage, do not have the conditions for industrialization, and large-scale capital entry is not suitable; The core technology of some enterprises is just simple technology grafting, and there is no real scientific and technological innovation and development.

Optimize and standardize the multi-level capital market, and form a capital market with clear positioning, complementary functions and organic connections. Improve differentiated institutional arrangements, standardize the registration system, and strengthen capital market supervision and exit mechanisms for listed companies.

(3) Promote high-level opening-up, improve the ecology of science and technology finance, and promote high-quality development

The plenum proposed to improve the system and mechanism of high-level opening up, on the one hand, to highlight the importance of opening up, and on the other hand, to clearly put forward measures for high-level opening up, and to provide a guarantee for high-level opening up by improving the system and mechanism of high-level opening up. The plenum proposed to expand institutional opening-up, foreign investment and foreign investment management, and optimize the layout of regional opening-up, accelerate the construction of a new development pattern, and clearly release a signal of expanding high-level opening-up.

A high level of openness is also crucial for fintech finance. If the mainland's equity investment market is opened up to the outside world, more international venture capital funds are attracted to invest in China, and effective docking is achieved, which will greatly improve the capacity and service efficiency of science and technology financial services. Therefore, a high level of opening-up is crucial for China to develop science and technology finance, build a science and technology finance ecology, and achieve high-quality development.

(The author of this article is Zhu Bo, associate professor, School of Economics, Shanghai University)

The views expressed in this article are solely those of the author.