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High-tech Industry Thirsty for Money
In addition to venture capital, multi-channel investment involving commercial and investment bank loans, specific funds and listings on stock markets, are expected to speed up the development of the high-tech industry in China.
Experts, scholars and governmental officials announced at the 2000 Beijing Economic Forum, held between Monday and Tuesday in Beijing.
According to official statistics, the number of high-tech advances approved by at provincial- and central-levels reached 45,000 last year in China.
"However, only 12 per cent of the total products have been put into production and promoted on the market," said Ba Shusong, an official with the assets and liability management department of the Bank of China.
He attributed the fact to a shortage of funds and a limited capital investment channel into the high-tech sector.
Meanwhile, in spite of investment by the companies themselves and the central government, capital raised from the market comes to just 2.3 per cent of total funds raised for high-tech development and application.
"So far, bank and individual loans, government financial aid and listing are the major fund channels for high-tech enterprises, which are obviously far below the capital needs of the sector," Ba said.
Industry insiders say money pooled for a high-tech enterprise will increase with its development, while the risks involved should decrease by the day, which implies that a high-tech enterprise should attract investment from different channels in keeping with its various development periods.
"A high-tech business may experience five stages; seed, startup, growth, expansion and maturity, during its development," Ba said.
Wu Xiaoqiu, president of the Finance and Securities Research Institute-affiliated with the Renmin University of China, said that venture capitalists and commercial banks, who fully understand the operating principles behind high-tech enterprises, as well as government financial support, will play important roles in the first two stages of development, when the risks are high and the capital demand steep.
Various financial institutions, involving investment and commercial banks, insurance companies, specific funds and investment corporations, and individual investors are expected to take a part in the later growth and expansion stages.
"While, capital introduction from the public stock market will be the best way to fund a high-tech business in its mature stage," Wu said.
Once the enterprise reaches a period of steady development with sound management and financial situations, listing should expand the capital inflow channel and boost the company's progression towards operating in line with international market principles.
"Furthermore, expansion of the investment channels for the high-tech industry will bring good opportunities for the improvement of Chinese stock market," Sun Cairen, an official with the Beijing Securities Regulatory Office, watchdog for the stock market, stressed.
He called on the government and the financial institutions to improve China's market law system and create more financial derivative tools so as to establish a favorable environment for the development of the high-tech sector. (China Daily)
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