Build a Vibrant Innovation Capital Ecosystem — President & CEO Wang Jianjun’s Speech at the 20th China Venture Capital Forum

date: 2018-6-12

Distinguished guests, ladies and gentlemen,

 

Good afternoon.

 

Venture capital (VC) and Shenzhen Stock Exchange (SZSE) are in the same boat as we share the same mission and work for innovation and entrepreneurship. There is a natural bond between us. Many leaders and partners are present today. I see a flourishing VC industry and the great responsibilities and expectations on SZSE.

 

As what President Xi Jinping has recently highlighted at the meeting of academicians of Chinese Academy of Sciences and Chinese Academy of Engineering, we “should be fully aware that innovation is the primary driving force, deliver high-quality scientific and technological innovation, and support the development of a modern economic system.” According to the global industrial development trend, technological innovation and capital go hand in hand, coexist, and benefit each other. On the occasion of a new round of technological revolution and industrial transformation, the theme of this forum is “New Era, New Journey: Capital Engine Drives Global Economic Innovation”, which is of practical significance. Nowadays, both supply-side structural reform and high-quality development in China are in sore need of capital injection, especially innovation capital. SZSE always adheres to innovation, supports innovation, leads innovation, and embraces innovation, and is on a mission to build an innovation capital formation center. SZSE works with VC institutions and all market players to develop an innovation capital ecosystem.

 

I. SZSE adheres to innovation and grows together with the VC market

 

Two decades ago, as proposed by Mr. Cheng Siwei, China Venture Capital Forum was held in Beijing. In the past two decades, under the influence and impetus of China Venture Capital Forum, the VC concept has been popularized and become an important force that supports the development of new economy.

 

In the past two decades, SZSE has developed rapidly while the VC industry has flourished. VC and SZSE are in an upstream and downstream relationship. VC offers the sources of start-up capital, supports the rapid development of enterprises, and helps a lot of excellent enterprises go public on SZSE. As major innovations of the capital market reform, the SME Board and the ChiNext Board on SZSE offer important VC withdrawal channels. In this way, VC appreciates and capital is continuously channeled to innovation areas, creating a positive cycle of innovation and capital. For example, by the end of last month, 62% of 727 companies on the ChiNext Board have been supported by VC/PE. It is the positive cycle that keeps enhancing SZSE’s charm to the new economy. At present, among more than 2,100 listed companies on SZSE, more than 70% are hi-tech companies and those in emerging industries such as energy conservation and environmental protection, information technology, biomedicine, and new energy are flourishing and becoming the representatives of China’s new economy.

 

II. SZSE supports innovation and spares no efforts to develop an innovative enterprise service system

 

Innovation begins with technology and materializes with capital. An innovative economy must be equipped with a flexible and efficient innovation capital service system so as to accelerate achievement transformation and promote the formation of new productivity and new growth points. As a core institution in capital markets, SZSE has always been committed to serving innovation and entrepreneurship and has actively worked with all market players to channel resources to the areas featuring high efficiency, high return, and high growth, jointly promote the formation, flow, and circulation of innovation capital, and try to establish a well-developed innovative enterprise service system.

 

First, SZSE has cooperated with the Ministry of Science and Technology (“MOST”) to establish an investment and financing match-making platform for technological innovation enterprises. In 2004, SZSE and MOST jointly launched the “Technology SMEs Growth Roadmap Plan” and initially established a nationwide technological SME cultivation system. In 2014, again SZSE and MOST jointly upgraded it to version 2.0. By transformation with new technologies, the platform becomes more scalable and efficient and supports personalized, intelligent and precise matching between financing projects and investment institutions. It has created an open, transparent, nonprofit and efficient investment and financing match-making mechanism and offers ithe match-making services to start-ups.

 

Second, SZSE has worked with VC institutions to launch the “V-next” VC Alliance. The Alliance bring together known VC institutions in China to address general issues, such as inadequate project sources, impeded withdrawal channels, and incompetency for post-investment management. Centering on the business chain of “funding, investment, management and withdrawal”, the Alliance offers comprehensive services. In this way, SZSE and VC institutions have enhanced cooperation and jointly improved support and services for innovation.

 

Third, SZSE has worked with local governments to develop multi-dimensional market service systems. Based on local characteristics, SZSE offered service plans tailored to multiple provinces and cities, including “Wutong Project” in Zhejiang, “New Financial High Lands” in Jiangsu, and “Revitalization of Guangdong by Capital” in Guangdong. SZSE developed the “market-orientation, modernization and internationalization reform” plan for China Railways Corporation. SZSE also developed special connection plans for Xinjiang, Jilin and Inner Mongolia and offered comprehensive capital market services. SZSE has actively supported the development of regional equity markets and utilized its professional advantages to improve the technical capabilities and service efficiency of regional markets. In a crucial period of shift in the economic momentum, SZSE’s efforts create new chances for the transformation and development of the local economy.

 

III. SZSE leads innovation and strives to build a world-leading innovation capital formation center

 

The capital markets have a new mission in the new era. To achieve high-quality economic development, we should comprehensively improve the service capabilities of capital markets, continuously open up, accept new things, iterate and progress, and enhance tolerance for innovation and adaptability to changes in market demand. In recent years, innovative enterprises involving new technologies, new industries, new business types and new models have constantly emerged and played an important role in leading industrial development and economic transformation. A batch of innovative enterprises have developed cutting-edge technologies that are on the verge of fruition and call for capital support from capital markets.

 

This week, the China Securities Regulatory Commission (CSRC) released rules for the issuance of domestic shares or depositary receipts by innovative enterprises. It is an important measure to implement the spirit of the 19th CPC National Congress, carry out new development concepts, and strengthen the ability of capital markets to serve the real economy. It is a landmark reform of capital markets. It accomplishes the thing that capital markets “have attempted but failed to do for years”. At the 40th anniversary of reform and opening-up, this reform is of great significance. Under the centralized leadership of the CSRC, SZSE has actively carried out pilot projects, conducted in-depth research, and completed a lot of basic work. Currently, SZSE has completed the formulation of supporting rules, technical tests, and all preparations. Supporting systems will be released in the middle of this month. We will further carry out market mobilization and cultivation, strengthen front-line supervision and risk control of pilot projects, duly protect the legitimate rights and interests of investors, and ensure the smooth launch and operation of pilot projects.

 

Furthermore, SZSE will continuously improve the SZSE multi-tiered market system. We will further utilize the Main Board and SME Board, deepen the ChiNext Board reform and address the needs of innovative enterprises in an aim to promote the development of differentiated and diversified issuance and listing requirements and improve the flexibility and adaptability of M&A and refinancing systems. We will institutionalize and normalize the pilot innovation results and provide stable and reliable investment and financing environments for technological innovation enterprises. I believe that our capital markets are as inclusive as developed markets and our technological innovation will flourish.

 

IV. SZSE embraces innovation and actively advocates an innovation-inclusive market culture.

 

The reason why there is the letter “venture” in “VC” is that there are many uncertainties in this kind of investment. Some succeed and some fail. Some gain premium and some lose all. The development of China’s capital market is a process of starting in uncertainties and growing in inclusiveness. When Mr. Deng Xiaoping was on his southern tour in 1992, he pointed out that China’s securities and stock market should watch and learn from other countries; above all, we must resolutely try it. It is this strategic inclusiveness that has brought spring to the development of China’s capital market and made it rank second in the world in overall strength.

 

While serving innovation enterprises, we must soberly realize that innovation is an exploratory practice. Its process is full of difficulties and risks are unavoidable. An important function of the capital market is to “disperse risks”. From the perspective of an individual investor, it means the self-bearing of risks. At present, innovative companies often feature light assets and high investments and face many uncertainties such as business models, technology routes, and market competition. High growth is often accompanied with high risks. Only by making full use of the mechanism advantage of “risk sharing and profit sharing” of of the capital market can we promote the effective integration of innovation and capital and promote the sustainable development of innovation.

 

We should vigorously advocate a market culture that embraces innovation and guide the whole society to accurately understand the relationship between innovation and risks. By identifying risks and sharing risks, we can stimulate the vitality of micro-subjects and better support innovations. A more “uncertainty-inclusive and failure-inclusive” investing-financing environment shall be created to make the VC philosophy of “partial obligations undertaken by the seller and total risk born by the buyer” deeply rooted in people’s hearts. Only in this way can we promote that all innovative ideas are welcome and all innovative aspirations, actions and results conducive to social progress are encouraged, supported and respected.

 

“He who travels alone goes fast, but he who travels in company goes far.” The innovative capital ecosystem is a cause that jointly built, co-governed, and shared by the vast market entities, as well as a cause that we, the SZSE, sincerely welcome all of you here to participate in. We believe that a vigorous innovative capital ecosystem will definitely foster great innovative companies, will certainly boost the transformation and upgrading of China’s economic, and will surely promote the sound development of the real economy.

 

Last but not least, welcome everyone to visit SZSE.

 

Thank you all!