Pilot financial reform zones to spur sci-tech innovation in Yangtze Delta

China on Monday announced a framework plan to build more pilot financial reform zones for scientific and technological innovation in Shanghai, Nanjing, Hangzhou, Hefei and Jiaxing — all major cities in the Yangtze River Delta region.

The larger goal is to better connect finance, technology and industries so as to facilitate high-quality development.

To this end, eight top government departments, including the People's Bank of China, the central bank, the National Development and Reform Commission, the country's top economic regulator, and the China Securities Regulatory Commission, jointly released the framework plan on Monday.

Comprising 19 detailed measures, the framework plan aims at further optimizing the overall structural system in the zones and rolling out more innovative products to facilitate technological innovation.

China's first pilot financial reform zone for scientific and technological innovation was launched in Jinan, capital of East China's Shandong province, in November 2021.

Monday's plan stated that the multilayered financial market, which China has been building over the past few years, should play a bigger role in the pilot zones.

Technology companies are encouraged to seek financing in both domestic and overseas markets and list in regional equity markets. More competitive companies in the software, big data and artificial intelligence fields located in the zones should seek to go public in the A-share market, the plan stated.

Wang Pida, an analyst from Donghai Securities, said the targets set for the above industries as stated in the framework plan should be interpreted together with the digital economy report released by the NDRC on Wednesday.

While the report has provided guidelines to seek breakthroughs in "bottleneck" technologies, the framework plan has reiterated the country's focus on the digital economy, which is projected to better support the real economy by expanding the latter's scale and improving the development quality.

Buoyed by the framework plan, the A-share software development sector and big data sector reported average daily gain of 0.51 percent and 0.08 percent, respectively, on Monday, while the benchmark Shanghai Composite Index closed 0.39 percent lower.

Eligible commercial banks are encouraged to set up wealth management subsidiaries in the pilot zones to focus on technological innovation. Banks should better use relending and rediscounting facilities to provide more credit to companies undertaking technological innovation, the plan stated.

Insurance companies should innovate their business by providing more tailor-made policies like liability insurance for biopharmaceutical companies, insurance for first application of new materials, comprehensive insurance for patents and so forth.

Overseas private equity firms will be supported to pick up stakes in onshore technology companies via the qualified foreign limited partner route.

Qualified domestic institutions will be supported to take part in the mergers and acquisitions of overseas technology companies through the qualified domestic limited partner route, the plan stated.

Liu Yuanchun, president of the Shanghai University of Finance and Economics, said the financial services industry should adapt to the country's economic transformation by optimizing supply structure and efficiency, nurturing innovation and effectively supporting the real economy.

The framework plan also stated that companies in the pilot zones will be supported to issue corporate bonds. Special efforts should be made to allow small and medium-sized technology companies to issue high-yield bonds.

Ming Ming, chief economist of CITIC Securities, said the product portfolio concerning bond financing should be further enriched to support companies' development more precisely.

Technological innovation bonds catering to technologically advanced SMEs and bonds for financing high-growth industries and startups will be increasingly favored by companies, he said.