Efficient financial market to propel new quality productive forces
Published: Mar 14, 2024 05:53 PM
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A view of buildings in Beijing's CBD area Photo: VCG

A view of buildings in Beijing's CBD area Photo: VCG

High-quality development is the first and foremost task of building China into a modern socialist country in all respects, while developing new quality productive forces is an intrinsic requirement and a significant focus of promoting high-quality development in China. In a sense, technology innovation is the core to serve this purpose.

As a kind of economic activity that is of great significance, scientific research and technology innovation requires significant investment. Thus, how to effectively deploy and allocate financial resources is a key problem for the success of technology innovation. 

In the early stage of China's economic development, there was a relatively large gap between Chinese enterprises and global corporate leaders, which made it easy for Chinese enterprises to find a clear technological path to catch up with their global peers. In this process, indirect financing - where financial intermediaries played a critical role - could effectively allocate financial resources to meet those companies' needs and assist the country to achieve rapid and large-scale industrialization.

However, financial intermediaries sometimes have difficulty in instantly dealing with non-standard information amid uncertainties, and thus indirect financing could not support large-scale industrialization of high-tech industries and can hardly accommodate the drastic changes in economic structure.

As the Chinese economy is shifting toward innovation-driven qualitative development, the advantages of direct financing dominated by the capital market have gradually emerged. 

Direct financing means that companies and investors can communicate directly in the financial market, allowing everyone to fully express their opinions and be more tolerant of investors' errors in decision-making. In a word, this kind of financing can better handle uncertainties and non-standard information so as to support massive innovation activities.

According to the spirit of the Central Financial Work Conference convened in October, accelerating the building of a highly efficient financial market with reasonable structure is necessary for implementing innovation-driven growth strategy and boosting the development of new quality productive forces.

Most important of all, we should give full play to the functioning of China's capital market and earnestly implement the registration-based IPO mechanism so as to smoothen the liquidity channel and better guide much-needed capital to support the real economy and provide stable and sustainable financing for the development of new quality productive forces.

Specifically, financial regulators should further optimize the architecture of the registration-based IPO mechanism with overseeing the information disclosure at the core, and study and formulate guidelines on the disclosure of special information regarding technological, green, digital and other areas.

Meanwhile, more efforts should also be made to strengthen the connection between the multi-faceted capital markets and build a major bastion for servicing small and medium-sized innovation-oriented enterprises.

Third, authorities should diversify IPO conditions, and meet tech firms' various financing needs via Shanghai's tech-heavy STAR Market, the NASDAQ-style ChiNext bourse in Shenzhen, the Beijing Stock Exchange and the National Equities Exchange and Quotations (NEEQ) in a bid to boost better circulation among technologies, industries and finance.

Moreover, we should develop efficient bond market to expand innovation-oriented companies' financing channels and better support technology firms' financing.

The author is the deputy director of the department of FinTech of the Institute of Finance and Banking at Chinese Academy of Social Sciences.