Injecting certainty into future industry development through institutional innovation

Securities Times reporter He Jueyuan, Guo Bohao

As representatives of future industries point to the direction of a new round of technological revolution and industrial transformation, high uncertainty is a distinctive feature that sets them apart from emerging industries and traditional industries. Uncertainty in investment returns causes capital to “not dare invest” and “not be willing to invest,” and shifting technical routes result in high costs for enterprise trial and error. The outline of the “15th Five-Year Plan” calls for “establishing mechanisms for investment growth and risk sharing in future industries,” which is precisely intended to use institutional design certainty to offset uncertainties in the development process of future industries.

Future industries are driven by frontier technologies and cover key areas including quantum technology, bio-manufacturing, hydrogen energy and nuclear fusion energy, brain-computer interfaces, embodied intelligence, and 6G mobile communications, among others. A relevant official from the Ministry of Industry and Information Technology previously pointed out that China has comprehensive advantages such as a complete industrial system, a large industrial scale, and abundant application scenarios, providing fertile ground for the development of future industries. However, China’s development of future industries also faces problems such as insufficient system-level planning and an unsteady technical foundation.

At present, China’s development of future industries mainly depends on investment from fiscal funds and state-owned capital. Social capital has insufficient participation, and investment in original innovation and the pilot testing and maturation stage is weak. How to break the reliance on fiscal funding, encourage all kinds of operating entities and social capital to actively step in, and unleash the vitality of enterprises as innovation-driven subjects is the key to promoting the development of future industries today.

The solution lies in closing the misalignment between the high-risk characteristics of future industries and capital’s instinct to avoid risk. On the one hand, use an investment-growth mechanism to address the financing dilemma of “where the money comes from”; on the other hand, use a risk-sharing mechanism to eliminate the worries behind “not daring to invest.”

To establish an investment-growth mechanism, the focus is on building a financing-and-investment framework of “government guidance, market leadership, and multi-party coordination.” Given the features of future industries—long cultivation cycles and high risk—it is necessary to both strengthen patient capital and establish more guidance funds compatible with the long-cycle development of future industries. Through a “fund-of-funds + sub-funds” structure, social capital can be mobilized to “co-invest” and “invest for the long term,” forming a relay of capital. It is also necessary to innovate financial instruments, develop dedicated products such as “pledging intellectual property rights,” and guide financial liquidity to precisely direct and nurture start-up enterprises. Further, it is necessary to deepen reforms of fiscal funding from “appropriation-for-use” to “investment,” turning fiscal grants into equity investments, so as to realize a virtuous mechanism of “investment—exit—re-cycling” and enable fiscal funds to sustain ongoing “blood-making” capacity.

To establish a risk-sharing mechanism, the focus is on building a multi-party risk-sharing system with clearly defined rights and responsibilities, shared risks, and shared benefits. It is necessary to promote multiple parties—including the government, enterprises, financial institutions, and research institutes—to share innovation risks and reduce the trial-and-error costs borne by any single entity. For government investment funds and state-owned capital investing in future industries, implement differentiated performance evaluation and establish a tolerance-for-error mechanism centered on exemption from liabilities related to due diligence, compliance, and responsibility, creating a favorable atmosphere that encourages innovation and tolerates failure. At the same time, implement support policies for first-of-a-kind (sets) equipment, first-batch new materials, and first-edition software. Break through key bottlenecks in technology maturation and market validation. Use the certainty of scenario application to offset the dual uncertainties of both technology and the market, further strengthening social capital’s confidence in participation and its expectations for returns.

For the implementation of investment-growth and risk-sharing mechanisms, it also requires a mature industrial ecosystem as support. At present, China’s future-industry ecosystem is relatively weak. It needs to cultivate and grow technology-leading enterprises and unicorns, and give full play to their “chain leader” role in driving the ecosystem. It is also necessary to guide small and medium-sized enterprises to take the path of specialized, refined, distinctive, and innovative development. By working deep in subdivided fields, the key is to break industry barriers and promote the free flow of key factors such as talent, capital, and data within the ecosystem.

The period of “fifteen-five” is a critical window for the future-industry layout to take shape. Establishing investment-growth and risk-sharing mechanisms is not only about supporting industry development from the financing perspective, but also about laying a solid institutional foundation for innovation across the entire value chain of future industries, helping China seize opportunities and gain initiative in the global new round of technological revolution.

(Edited by Wang Zhiqiang HF013)

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