NPC Deputy Tian Xuan: Banks Play a Relay Role in the Science and Technology Innovation Chain

Southern Finance National Two Sessions Report Team Tang Jing Bian Wanli

Under China’s long-standing financial structure dominated by indirect financing, what roles can commercial banks still play in supporting technological innovation and industrial development?

National People’s Congress delegate and Peking University Distinguished Professor Tian Xuan told 21st Century Business Herald that China’s science and technology finance has developed rapidly with government support, but there is still room for systemic optimization. For example, China’s current financial system, which mainly relies on bank-based indirect financing, does not fully align with the national goals of early-stage, small-scale, long-term, and hard technology investments, leading to multi-level mismatches.

The first level is the mismatch between short-term and long-term financing. Early-stage, small-scale technological innovation projects have very long cycles, while banks in the indirect financing model tend to focus on short-term loans—six months, one year, two years, three years—which do not match the often eight, ten, or even longer cycles of technological innovation.

The second level is the mismatch between certainty and uncertainty. The support for early-stage, small-scale, long-term, hard technology projects involves highly uncertain innovation processes, whereas banks generally pursue certainty.

The third level is the mismatch in funding volume. Early-stage small projects require relatively small amounts of capital—tens or hundreds of thousands of yuan—while banks, especially large commercial and state-owned banks, tend to provide larger-scale loans.

“Therefore, there is still significant room for improvement in the development of China’s science and technology finance,” Tian Xuan said. We are vigorously developing direct financing, especially equity financing, which requires the introduction of patient capital as well as bold capital.

He further pointed out that in the primary market, optimizing the evaluation and assessment system for state investment agencies, reducing their risk-averse tendencies, and guiding them to invest in early-stage and long-term projects; in the secondary market, introducing long-term investment forces such as insurance funds, pension funds, and retirement funds to truly achieve long-term investment. Equity investment and other forms of direct financing are more supportive of from zero to one technological innovation, which may lack stable cash flow and mature business models, making them more suitable for direct financing.

In Tian Xuan’s view, China has a large indirect financial system represented by banks. Commercial banks are not useless for technological innovation and industrial development but play a relay role within the entire innovation chain.

He said that after achieving breakthrough innovations from zero to one, industrial innovation connecting from one to one hundred, or even from one hundred to infinity, requires the participation of commercial banks. These enterprises already have mature business models and technological products and need to expand through iteration and replication, which aligns highly with the characteristics of commercial banks. Therefore, through the indirect financing system of commercial banks, more support can be provided to enterprises with stable cash flow, mature business models, and reliable products to facilitate industrial innovation.

Tian Xuan stated, “We should combine direct and indirect financing, equity and debt financing, to continue efforts and cover the entire lifecycle of enterprises, thereby better improving innovation levels and developing new productive forces.”