Banks gear up financial services for high-tech firms

China's banking sector is ramping up its technology finance capabilities as it pushes toward high-quality development, with experts urging lenders to adopt a portfolio-based approach to sci-tech lending and assess whether overall returns can offset aggregate risks amid the rapid rise of innovative enterprises.

HSBC Bank (China) Co Ltd recently launched a new financial services brand in the Chinese mainland aimed at supporting tech-innovation enterprises, committing $1.5 billion in credit to help fuel the sector's growth.

As technological innovation becomes an increasingly important driver of China's high-quality development, and as more Chinese tech firms expand overseas, HSBC's dedicated tech-finance team will target companies in technology, life sciences and healthcare, particularly startups and fast-growing firms backed by venture capital or private equity.

Acknowledging the light-asset structures and novel business models common in the sector, HSBC said it will evaluate companies based on multiple factors, including core technologies, patent strength and market outlook. Alongside the $1.5 billion in credit, the bank will also provide working capital, capital expenditure financing, treasury management and broader funding solutions, offering full-lifecycle support for firms at different stages of growth.

"China's vibrant innovation ecosystem has given rise to a group of global leaders in emerging industries. As technological innovation in China enters the next five years of accelerated development, Chinese companies' innovation capabilities will further improve," said Wang Yunfeng, president and CEO of HSBC Bank (China) Co Ltd.

"By scaling up in tech finance, foreign banks can leverage cross-border resources to serve more 'little giant' firms, unicorns and industry leaders, helping more Chinese innovations and intelligent manufacturing go global," Wang said.

China CITIC Financial Asset Management's Anhui branch recently used an equity investment-driven rescue package to ease the financial strain at Jinzhai Guoxuan New Energy, a subsidiary of Gotion High-Tech that specializes in energy-storage systems.

The company had taken on heavy debt amid rapid technology upgrades and production-line expansion, leaving its leverage well above the industry average and limiting its ability to secure new financing.

To address the pressures, China CITIC Financial Asset Management designed a combined "debt-to-equity conversion plus debt restructuring "plan aimed at improving the firm's zero-carbon asset management and enabling it to capitalize on carbon-reduction revenues.

Following the program's rollout, Jinzhai Guoxuan New Energy's asset-liability ratio dropped from 70 percent to below 60 percent, restoring its capacity to raise funds independently. The move also unlocked its full annual cell output potential of 25 gigawatt-hours, lifting capacity utilization from 55 percent to more than 80 percent.

In a recent commentary in the Beijing-based Financial News, Yin Jianfeng, chief economist at China Zheshang Bank, argued that tech finance increasingly resembles equity investment, with banks needing to view sci-tech lending as a portfolio and judge success by whether aggregate returns outweigh aggregate risks.

Yin said this shift requires dedicated evaluation mechanisms, longer assessment cycles of two to three years, and reasonably raised ceilings for nonperforming loan ratios.

Yin said many high-quality tech firms are pursuing breakthroughs along a "second growth curve", and banks that take a dynamic view of these companies can capture strategic opportunities before that next growth phase accelerates.

That, he said, means moving beyond static financial-statement analysis and focusing instead on firms' growth trajectories and long-term potential.

As China's banking sector builds a diversified, full-lifecycle technology finance system, Yin emphasized the importance of identifying enterprise value through multidimensional information channels. A range of innovative products has emerged, including unsecured loans linked to the national innovation-scoring system, which evaluate firms based on patents, R&D spending, technology-contract transactions, and sustained revenue growth, and investment-loan linkage products developed in partnership with venture capital firms to leverage their due-diligence strengths.

These products form an integrated service network covering the entire corporate lifecycle, enabling banks to flexibly combine financial instruments based on companies' development stages and deliver more targeted, precise support, Yin said.

According to the People's Bank of China, China's outstanding sci-tech loans were up 11.8 percent year-on-year as of end-September, outpacing total loan growth.

New sci-tech loans accounted for 30.5 percent of all new loans. Renminbi and foreign-currency loan balances for tech-based small and medium-sized enterprises reached 3.6 trillion yuan ($509.3 billion), up 22.3 percent year-on-year — 15.8 percentage points higher than total loan growth.