In line with the fundamental requirement for the financial sector to serve the real economy, we must focus financial innovation and services on serving the endogenous need of the real economy. Recently, the State Council released ten new initiatives to further boost financial support for the real economy. “Sluggish finance will lead to stagnant real economy,” Premier Li Keqiang said when describing the relationship between finance and the real economy.
A decade ago, the SZSE launched the SME Board and started a nationwide project to help with corporate restructuring and incubation for SMEs. With the evolution and enhancement of the multi-tiered capital market, especially after the launch of the ChiNext market, our incubation work has gradually extended downward to integrate with local economy. It has also been incorporated in the development of local scientific, technological and financial system, SME financial support system and regional financial eco-system. During the course of our exploration, I could sense a stronger role of the multi-tiered capital market in directly supporting and driving entrepreneurship, innovation, SMEs and local economy. Meanwhile, enhanced cooperation with local governments strengthened the financial support system for boosting entrepreneurship and innovation, improved the local financial ecosystem and further magnified the leverage effect of the multi-tiered capital market, which in turn, consolidated the basis for the rapid and sound development of the multi-tiered capital market.
As the world’s second largest economy in an economic transition, China still lags far behind in terms of capital market service. We must speed up market reforms and innovations. Among others in the ten new initiatives of the State Council, “quickly unveil the reform plan of IPO registration system, scrap the requirement of continued profitability, establish a rapid small-sum refinancing mechanism for the capital market and launch the pilot equity crowdfunding program” are among the most urgent. In addition, we will take full advantage of reform and development of the multi-tiered capital market and solve financing problems of SMEs and innovative enterprises by expanding market platform, extending product lines and improving our service system. I’d like to take this opportunity to introduce to you our most recent efforts.
First pushing forward reform of the ChiNext market and enriching market tiers. We will enhance the inclusiveness and flexibility of ChiNext by launching a special segment in the ChiNext, taking into full account the operating status and development trend of Internet businesses and innovative technological enterprises as well as the reform initiative of lowering listing threshold and the progress of a registration-based IPO system.
Second, launching the “Growth Roadmap 2.0 of technological SMEs”, jointly developing a hi-tech and finance network, enhancing the capability to serve technological SMEs and creating a ChiNext-led, innovation-centered financial service chain. As early as 2004, SZSE and the Ministry of Science and Technology jointly rolled out the “Roadmap Plan of Technological SMEs” with the purpose to incubate technological SMEs in hi-tech parks. Thanks to generous support and active participation by various parties, the program has been operating for 10 years and constantly enriched, effectively supporting development of the SME Board and ChiNext market.
In recent years, technological financial service has made great strides. A financial service system has taken shape, comprising funds, angel investments, PEs/VCs, OTC markets, technological banks and covering different growth stages of technological innovation. Based on this, the upgraded “Roadmap 2.0” sponsored jointly by the Ministry of Science and Technology, the SZSE and China Merchants Bank started operation on October 30. Its first road show and training activity was held in Xi’an. By leveraging on the Internet technology and via a unified platform, the “Roadmap2.0” realizes information sharing, process linkages and functional complementation among government agencies, hi-tech parks, capital markets, financial institutions and third-party service intermediaries so as to provide an all-rounded, comprehensive financing and service platform for technological SMEs.
Third, supporting the establishment of regional equity markets and developing the financial service system for local SMEs. OTC markets are the cradle for issuer resources. Development of OTC markets will cement the basis of exchange markets and extend the service scope of the multi-tiered capital market downward significantly. The new Nine-point Opinions released by the State Council has made it explicitly clear that regional equity markets are part of the multi-tiered capital market system.
In the past, the SZSE and various local governments rolled out a suite of supporting policies and working mechanisms for the incubation of listing candidates, which have played an active role in accelerating the cultivation and listing of key SMEs. Although such policies and mechanisms only covered a few listing candidates, some local governments realized the huge potential of integrating local financial resources and supporting SMEs. Over the past two years, local governments have actively explored ways to build regional equity markets. Leveraging on such market-oriented platforms, local governments quickly gathered local SMEs, service providers, financial institutions, policies and information. This has become an important way for local governments to promote SME service systems. Based on the early cooperation and incubation foundation, the SZSE has supported the establishment of equity exchanges in a few key cities to create a routinized and comprehensive SME financial support platform. Our efforts have yielded preliminary results. For instance, in Shenzhen, more than 4000 enterprises have been quoted on Qianhai Equity Exchange, raising over RMB 1.6 billion through private placement of bond products. In Wuhan, banks have provided equity-pledge loans totaling RMB 8.16 billion for quoted companies. In Qingdao, local government invests public funds in the equity market to support SMEs.
Fourth, actively developing SME private placement bonds, asset-backed securities and other fixed-income products to expand the scope of service to the real economy. Apart from equity markets, the SZSE has actively developed diversified financing tools to serve SMEs and the real economy. Among others, SME private placement bonds mainly target micro- and small-sized enterprise. By the end of October, of the 344 SMEs that have filed for record, 224 enterprises have completed issuance of 277 private placement bonds, raising RMB 29.96 billion. Moreover, SZSE attaches great importance to asset-backed securities (ABS) and has a dedicated ABS team. Since 2005, a total of 37 specific plans have been offered, raising RMB 66.6 billion. Out of the 37 specific plans, 24 have been listed on SZSE’s Block Trade Platform, raising RMB 31.25billion. Among others, Alibaba’s small loan special asset management plan has opened a new door for small loan funding. The newly offered Xuzhou Shantytown Redevelopment ABS product found a new way to tap idle assets of indemnificatory housing and attract social funds for participation in the development project.
Fifth, reinforcing the exchange’s public platform function and cultivating a culture of entrepreneurship and innovation. Along with the acceleration of economic transformation and upgrading and the deepening of innovation-driven national strategy, fresh waves of social entrepreneurship and innovation are emerging and surging. In order to become a broad platform for social entrepreneurship and innovation, the multi-tiered capital market must further intensify its functions and foster an environment that inspires entrepreneurship and advocates innovation. Exchanges should also take the initiative to assert their roles as public platforms to create the social ethos of entrepreneurship and innovation.
For instance, since last year, we have started to set up a program named “Home for Universities” in partnership with a few domestic universities. We invited university students to the SZSE as well as outstanding entrepreneurs to universities, so that students will have better understanding and first-hand experience of the cutting-edge issues of entrepreneurship and innovation from the perspective of listed companies. This program was well-received by university teachers and students. Universities are breeding grounds for innovative ideas and talents. We hope that the seed and dream that we plant today in the hearts of young people will burgeon and blossom in the future and amass more new force for entrepreneurship and innovation. In addition, to allow for more entrepreneurs to share their successful experiences, we have also held a series of lectures this year, delivered mainly by chairmen and CEOs of listed companies, open to start-up entrepreneurs, intermediaries and investors in the respective industries. In summary, the exchange serves as a public platform for interaction between universities, service providers, entrepreneurs and investors, and an advocate for entrepreneurship and innovation.
It is a systemic project for the capital markets to serve the real economy, while we are continuously enhancing our understanding of the mission and role of the capital market. The deepening of all-round reforms and strategic economic transformation is bringing about historical development opportunities for the capital market. Dedicating to turning the SZSE into a tailor-made multi-tiered capital market and establishing a robust supporting system with products and service, we will serve the real economy to a higher level and in a broader scope.