Two Sessions Proposal | National People's Congress Representative Pan Yue: Finance Must Solve the Capital "Source, Risk Appetite, and Access" Challenges in Supporting Future Industries

China Economic Journalists Fan Hongmin Beijing Report

National People’s Congress Deputy and Professor at Xiamen University School of Economics Pan Yue (photo provided by interviewee)

Following the draft outline of the 14th Five-Year Plan, the 2026 Government Work Report again emphasizes the need to “cultivate and expand emerging industries and future industries.”

The Government Work Report states: “Establish mechanisms for increased investment and risk sharing in future industries, and foster the development of future energy, quantum technology, embodied intelligence, brain-computer interfaces, 6G, and other future industries.” “Make good use of the National Venture Capital Guidance Fund, vigorously develop venture capital and angel investment, and government investment funds should lead in patient capital, promoting more startups to accelerate growth into technology leaders.”

“Currently, the financial system still faces issues such as structural mismatches between capital supply and demand, and shortcomings in financial product services supporting future industry development. Efforts are needed to optimize capital supply, improve evaluation mechanisms, and promote product innovation to solve the three major problems of where capital comes from, how to dare to invest, and how to reach the market,” said Pan Yue, a deputy to the National People’s Congress and professor at Xiamen University School of Economics, in an exclusive interview with China Business Journal during this year’s two sessions.

Combining Source Prevention and Diversified Sharing

China Business Journal: Compared to traditional science and innovation industries, what new challenges do future industries pose to financial institutions?

Pan Yue: Future industries are characterized by foresight, disruptive innovation, and strategic importance. Their development paths are highly uncertain, technological value is difficult to assess, and current market sizes are limited, which presents new challenges to service models of financial institutions.

First, traditional science and innovation industries often focus on optimizing and upgrading mature technologies or established business models, with relatively controllable risks. In contrast, future industries have unclear technological routes, application scenarios, and profit cycles, conflicting with the risk preferences of traditional financial institutions that pursue short-term, controllable returns, leading to a mismatch between capital supply and industry demand.

Second, the “light assets, heavy R&D” nature of future industries means their core assets are intangible, such as intellectual property and technical teams. However, current evaluation systems rely on historical data and physical assets, lacking scientific tools to assess the market prospects and potential risks of cutting-edge technologies, rendering traditional credit logic based on collateral and stable cash flows ineffective.

Finally, since future industries are still in the nurturing stage with limited market size, financial institutions lack motivation to tailor specific financial products for them. Even with innovative modes like intellectual property pledges, difficulties in valuation and transfer hinder large-scale implementation, resulting in a severe shortage of financial tools capable of effectively covering risks and sharing future growth benefits.

China Business Journal: Could you briefly explain the connotations of the “growth in investment and risk-sharing mechanisms for future industries”? How should such mechanisms be constructed?

Pan Yue: Establishing mechanisms for increased investment and risk sharing in future industries is a key measure to break through development bottlenecks and solidify the foundation of new productive forces. Future industries feature long R&D cycles, rapid technological iteration, large upfront investments, and high commercialization uncertainty, often facing difficulties in ensuring investment and resolving risks.

Creating an investment growth mechanism aims to address the bottleneck of “dare not to invest or invest poorly.” First, funding for future industries often overly depends on fiscal and state-owned capital, with insufficient participation from social capital; second, investments tend to focus on application stages, with weak input into original innovation and core frontier technologies. This mismatch in investment subjects, stages, and directions hampers sustained growth and effective transformation. Therefore, a structure-optimized investment growth mechanism should be built, following the principles of the innovation ecosystem, cultivating patient capital, improving incentives and constraints, and planning across the entire cycle to align capital supply with innovation needs and industry development, achieving stable investment and efficient conversion.

For risk sharing, the goal is to solve the problems of “fear of failure and inability to bear risks.” Future industries face high uncertainty in technology routes, market prospects, and regulatory rules, which can lead to strategic misjudgments, inefficient resource allocation, and lagging adjustments. Without institutionalized risk-sharing arrangements, the costs of trial and error are high for various entities, and risk exposure is large, making independent risk bearing difficult. Therefore, a combination of source prevention and diversified sharing must be adopted, strengthening forward-looking assessment and risk identification, and improving systems for pre-emptive risk prevention, process control, multi-party risk sharing, and timely risk mitigation to support healthy development of future industries.

The National Venture Capital Fund should leverage leverage and market-oriented operation

China Business Journal: The current government work report mentions “making good use of the National Venture Capital Guidance Fund, vigorously developing venture capital and angel investment, and government investment funds should lead in patient capital.” How can the National Venture Capital Guidance Fund be used effectively? What supporting policies are needed to ensure government funds lead in patient capital?

Pan Yue: This deployment precisely targets the core pain points of early-stage financing difficulties, cycle mismatches, and high risks faced by tech companies, and sends three clear signals: First, capital should shift upstream, with guiding funds focusing on early, small, and hard-tech investments, greatly expanding early-stage entrepreneurial capital; second, emphasizing efficiency, “making good use of” highlights shifting from merely establishing funds to focusing on effectiveness, with precise deployment, standardized operation, and improved fund utilization and policy implementation; third, advocating long-termism, government investment funds should lead in patient capital, addressing issues like short-term profit chasing, reluctance to invest long-term, and hesitance to try risks.

To make good use of the guidance funds, it is crucial to fully leverage leverage effects and adhere to market-oriented mechanisms. On one hand, focus on key areas like technological innovation and future industries, using government funds as a catalyst to attract social capital and expand venture and angel investments, thereby broadening the supply of long-term funds from the source and increasing investment in original innovation and frontier technology R&D. On the other hand, maintain market-oriented operation and professional management, clarify the boundary between government and market, follow venture capital industry rules, optimize decision-making and incentive mechanisms, and improve allocation efficiency and investment returns.

For government funds leading in patient capital, supporting policies should include sharing benefits, tolerating errors, and facilitating exit channels. First, optimize benefit transfer and reinvestment mechanisms, reasonably share government returns with social capital involved in early, small, and hard-tech investments to motivate long-term investment. Second, establish sound due diligence exemption and risk tolerance systems, relaxing loss tolerances for long-term investments aligned with strategic directions and proper procedures, alleviating post-investment concerns. Third, streamline diversified exit channels such as follow-up investments, mergers and acquisitions, and share transfers, creating a virtuous cycle of “investment—cultivation—exit—reinvestment.”

Recommend developing valuation guidelines suitable for various future industries

China Business Journal: Currently, what compatibility issues exist between the domestic financial system and the support needs of future industry development? What suggestions do you have for building a better financial support system aligned with future industries?

Pan Yue: Currently, the financial system still faces the following issues in supporting future industry development: First, a structural mismatch between capital supply and demand. Future industries often require long cycles from laboratory to commercialization, but the current financial system, influenced by performance assessment mechanisms and risk preferences, tends to favor mature projects with clear short-term returns, leading to capital gaps in early stages. Second, there are shortcomings in financial product services. The market size of future industries is limited, and financial institutions lack strong commercial motivation to develop dedicated tools. Even with policy-driven innovations like intellectual property pledges, systemic barriers such as valuation standards and illiquid transfer markets hinder large-scale implementation, further restricting financial coverage.

To address these issues, efforts should be coordinated in optimizing capital supply, improving evaluation mechanisms, and promoting product innovation:

First, build a full lifecycle capital support chain to solve “where does the capital come from.” It is recommended to strengthen the strategic guiding role of government investment funds, improve and implement fault-tolerance mechanisms, clarify due diligence boundaries; increase the proportion of long-term funds like pension and insurance capital in equity investments; and develop regional equity markets and venture capital funds to open green channels for future industry companies with core technologies.

Second, break through mechanisms that make evaluation and risk control difficult, solving “how to dare to invest.” It is suggested to develop valuation guidelines tailored for various future industries, incorporating intangible assets like intellectual property and R&D teams into core evaluation indicators; encourage financial institutions to move beyond traditional collateral thinking, building risk assessment models centered on technological barriers and R&D conversion rates; and leverage “government + platform + finance” data connectivity to establish enterprise technology profiles, improving risk identification accuracy.

Third, continuously improve the quality and efficiency of financial services to address “how capital reaches.” It is recommended to deepen integrated financial services such as “investment-loan linkage” at key nodes, promote the use of intellectual property pledges, and encourage banks to open green channels for financing; and utilize digital technologies to build future industry financial service platforms, enhancing responsiveness.

(Edited by: Li Hui; Reviewed by: He Shasha; Proofread by: Yan Yuxia)