China’s multi department guidance on financial support for its three international science and technology innovation centres, published by the People’s Bank of China on October 19, sets targets rather than rates, and that is the point. By 2030 the system supporting the Beijing Tianjin Hebei, Shanghai Yangtze Delta and Greater Bay Area centres should offer full chain financial services for innovation with the share of direct financing clearly higher and a regionally integrated service pattern basically formed; by 2035 the aim is a technology finance system matching globally influential innovation centres.
The instruments are the ones this cycle keeps choosing over the policy rate. The guidance extends the science and technology innovation and technical transformation relending programme, on a pilot basis, to private small and medium sized enterprises with high research and development intensity in the centres. It tells banks to build patient capital through venture funds, including the national venture capital guidance fund and social security technology funds, and to develop merger and acquisition funds. For bond markets, it encourages index products for technology innovation bonds, the use of credit risk mitigation warrants and credit protection tools to support technology bond issuance, and the existing risk sharing tools for private enterprise bonds, alongside local one stop service windows for technology bond issuance.
The regional division of labour is explicit. Beijing is to build on the national financial management centre and the Beijing Stock Exchange’s role serving innovative small firms; Shanghai on the stock exchange as a global technology trading and pricing hub and the STAR Market reforms; the Greater Bay Area on Hong Kong’s international financial centre, Shenzhen’s exchange, and cross border mechanisms including qualified foreign limited partner facilitation, higher cross border financing limits for innovation point system firms, and renminbi bond models such as Yulan bonds and Shanghai free trade offshore bonds. Cross regionally, the innovation points system is to be recognised across all three regions first, with technology firm credit data opened to financial institutions.
The document closes with the standing constraint: risk prevention and control mechanisms are to be strengthened and the bottom line of no systemic financial risk held. Read alongside Tuesday’s confirmed seventeenth straight hold in the loan prime rates and Governor Pan Gongsheng’s Financial Street Forum speech on framework reform, the guidance is the operational half of the current stance. The price of money is not moving; the plumbing that decides who gets it is.