Tech insurer, SME bank on horizon

CAS Holdings making swift moves to address needs of new-age businesses

China is on course to launch its first technology insurance firm and a technology bank equivalent to the Silicon Valley Bank by 2020 as the high-tech sector gets set to fuel the next wave of economic growth.

The proposal to establish a tech insurance firm, submitted in the form of an application last year, has "received warm response" from the China Insurance Regulatory Commission, said Wu Lebin, chairman of Chinese Academy of Sciences Holdings Co Ltd, a State-run asset management company and a key initiator of the move.

"We see great hopes to lead the country's first tech insurance company, serving high-tech companies of all scales and in various stages, from project approval to product selling," he told China Daily during the Boao Forum for Asia in Hainan province last week.

The proposed insurer will need to have at least five founding shareholders, and at least 1 billion yuan ($145.44 million) in registered capital.

Most firms are affiliated to the Chinese Academy of Sciences, the national institution dealing with basic and applied research.

Additionally, the Chinese Academy of Sciences has reached an agreement with the municipal government of Shanghai to establish a bank to extend loans to small and medium-sized enterprises looking for funds to grow their business.

According to Wu, details are currently being discussed with the China Banking Regulatory Commission.

He said the tech insurance firm is likely to be set up earlier than the bank, but both are expected to debut before 2020.

The company directly controls 48 companies, of which 25 are publicly traded, including Lenovo Group.

China's 13th Five-Year Plan (2016-20) has accorded strategic importance to the high-tech sector, to help the country to move up the value chain. High-tech products now account for about 30 percent of China's total trade volume, according to a report by consultancy KPMG in 2016.

Tel Aviv, the capital of Israel, and the Silicon Valley in California, both cradles of high-tech startups, have seen the mushrooming of insurance and financing institutions to help companies to unleash a host of unique products, without worrying about capital shortage.

It is thus imperative for China to have financial institutions that understand new business models in the Internet Plus era and address the needs of tech firms, said Li Chao, analyst with Beijing-based iResearch Consulting Group.

"High-tech companies, notably startups, are more likely to be undervalued when assessed by traditional banks and insurers. They should refrain from using old benchmarks such as profitability and instead focus on more relevant indicators like user base and conversion rates," he said.

Such new institutions should be empowered by new technologies such as big data analysis and blockchain to create new services and insurance products dedicated to tech firms, he said.