Currently, the global pattern of science and technology competition is profoundly reshaped, and science, technology and innovation have become the main battlegrounds of the great powers. China is moving from a “world factory” to a “middle power country”, from a “technology catch” to a “primitive lead”. In this leap, the original innovation of “0 to 1” became the key variable determining the competitive position. The fundamental characteristics of original innovation are long cycles, high risk and high uncertainty, and its demand for financial services is not simply a flow of funds, but an institutional arrangement that can read and understand technical language, tolerate trial and error costs and accompany long cycles of growth. The construction of a science and technology financial system that supports original innovation needs to direct financial resources towards the precise allocation of basic research, frontier exploration and critical core technology critical areas, and to build a strong financial foundation for high-level technology self-reliance。
Building science and technology finance systems that match original innovation
The fundamental characteristics of the long, risky and uncertain life cycle of original innovation dictate that the science and technology financial system that supports original innovation must establish a new logic that can cross cycles, tolerate failures and understand technology, and that needs to be rooted in people, institutions and systems。
Building a new system of science and technology finance with a first focus on people. Science and technology finance is not so simple as “paying money”, but rather a value co-founder who can identify the potential of technology and understand industrial logic. The reason why some financial institutions “do not understand and do not want to vote” is rooted in the lack of a complex pool of people who know both finance and technology. Risks cannot be effectively identified and can be avoided by “no vote” when technocrats do not understand the value of patents, understand the differences in technological paths, and judge the team’s technical credentials. Developing a cadre of financial personnel with knowledge of the science and technology industry is therefore fundamental to the effective functioning of the science and technology financial system. This requires financial institutions to break the traditional industry research paradigm and build professional capacity in hard-tech areas — not to require operators to become scientific experts, but to fully respect the uncertainty and long-term nature of sti in system design and risk assessment. Respect for the spirit of scientists and entrepreneurship, on the basis of the upgrading of human capacities, the objective patterns from basic research to technical validation to industrialization, and the abandonment of the “short-run” mentality. Only when people's perceptions are upgraded can finance truly understand technology, see the future and take certainty in high uncertainty。
Institutional reform needs to be pursued simultaneously, based on human capacity development. The long-term cycle and high uncertainty characteristics of the original innovation determine that its financial system needs to be supported by an in-depth system of “software”. The first is the culture of innovation. Raw innovation means a high failure rate, which is inherent in it. A culture that tolerates failure and encourages exploration can effectively free innovators from ideological constraints, allow them to venture into unknown areas and learn quickly from failures. The second is policy continuity. The investment cycle of science and technology finance often spans more than a decade, and if policy direction is volatile, it is difficult for operators to develop stable long-term expectations and patient capital. Financial institutions and investors dare to lock funds in long-term projects only if there is a cross-cyclical institutional commitment to make “early, small, long-term” a predictable policy signal rather than a short-term movement. Finally, intellectual property protection and the rule of law environment. Strict property rights protection assures innovators and investors of a return on their results and thus a willingness to invest in long-term, high-risk research and development; mature contractual spirit ensures that complex investment provisions are efficiently implemented; and a stable rule-of-law environment provides a predictable regulatory framework for commercial activities. Together, these invisible institutional mechanisms, “software”, constitute a fertile ground for innovation and a deep guarantee of the effective functioning of the science and technology financial system。
Building on the dual foundation of talent and institutions, the construction of the science and technology financial system requires synergy among the four pillars of government investment funds, patient capital, credit finance and capital markets。
Among them, governments should act as “hidden top-risk investors” with instruments such as the national entrepreneurship investment inducement fund (nefi) taking on the initial exploration risks and providing “first push” in areas where markets are afraid to enter. Patience capital needs to match the long-term characteristics of original innovation with the availability of capital through institutional arrangements such as extending the duration of the fund's life, easing the single-project appraisal cycle and truly “early, small, long-term, hard technology”. The credit system must move from “statements” to “technology”, incorporating “soft information” such as r & d input intensity, patent layout quality, core team background, etc., into the quantitative evaluation model, making it a “hard basis” for credit certification. Capital markets should perform the function of “value detectors”, which provide pricing and financing pathways for different stages of creative enterprise through multi-layered market structures, and give prominence to the “sovereign value” of original innovation and channel social capital towards the most promising technology。
The four above do not operate in isolation, but support each other: government investment funds assume initial risks, patient capital provides cross-cyclical escorts, credit systems contribute scaled funds, capital market value realization and reinvestment, and together build institutional financial supplies covering the entire life cycle of original innovation。
Building a new paradigm of “innovation + industry + finance”
The linear innovation model of “basic research-applied research-product development” is no longer appropriate to the pace of contemporary innovation in today’s era of accelerated breakthroughs in the ai revolution and deep integration of science and engineering. The original innovation no longer follows a one-way path from a laboratory to a market, but presents a complex picture of technological breakthroughs, industrial demand and financial capital embedded in each other, and spiraling. The functional positioning of science and technology finance must move from an “innovation chain back-end toolkit” to a “innovation ecological hub”. Science and technology finance is not simply an investment act, but an integrated ecosystem that, supported by accompanying policies, promotes the financial integration of technological and industrial innovation. This judgement reveals the essence of science and technology finance: it is not so simple as “paying money” but rather as a technology value discoverer, a co-owner of industrial risk and an innovative eco-builder。
The construction of a “technology-industry-finance” virtuous circle requires a three-way street。
First, science, technology and innovation are fundamental to the functioning of finance. Only with cutting-edge technological orientations, improved r & d systems and high-quality scientific and technological skills can scientific and technological results be generated with originality and growth space, attracting financial resources for proactive attention and precision。
Second, industrial ecology is a vehicle for the realization of financial values. Only if science, technology and innovation gains are translated into real productivity into industry can financial resources yield sustainable returns. The more complete the chain is, the more mature the cluster is, the lower the external constraints and uncertainties facing the transformation of results, and the smaller the risk of financial inputs。
Thirdly, the financial business landscape is the key hub linking the two. Science and technology enterprises face different risk structures and financing needs over different life cycles, and a sound financial business system can provide “equity financing - bank credit - bond financing - science and technology insurance - finance guarantee” multiple relays and co-ordinated services. The three are cycling, and original innovation is the breeding ground。
Establishing a two-way balanced regulatory framework for “mistake-prevention”
The high rate of expansion in science and technology finance has exposed risks that cannot be ignored, highlighting four aspects. The first is the existence of formalism of “severe separation”. Some financial institutions see “scientific finance” only as leverage for regulatory ratings and policy resources, and there is no real bias towards science and technology in terms of performance and staffing, leading to widespread distribution of “innovation credit” without reference to innovation points, “scientific branches” with no substantive business, etc. The second is policy arbitrage. Low-cost science and technology credit, driven by a profit-by-benefit drive, has been transformed into a arbitrage tool through a path such as “packaging of science and technology projects - access to credit finance”, resulting in the loss of funds and erosion of policy effectiveness. Third is the concentration of investment risk. With capital advantages and information monopolies, the head agencies have concentrated considerable resources on a few popular tracks, triggering investment and duplication, and small and medium-sized institutions and early projects have been squeezed out of capital supply maps. Fourth is the valuation risk. Science and technology projects have a “non-linear valuation” character, the value of which is highly dependent on subjective judgment of the technological outlook - – market sentiment tends to trigger valuation bubbles when it rises, and when it falls, it may miss out on early projects with real innovation potential。
The four types of risk, although in different forms, point collectively to a deep root cause, the absence of value anchors. Traditional finance is based on historical data and physical assets, while the subject matter of science and technology finance — technology patents, research and development pipelines, data assets — is highly uncertain and difficult to standardize. When anchors are missing, the risk accumulates in the gap between “names” and “real”, in the arbitrage of policies, and in the tide of capital。
There is an urgent need for a two-way, balanced regulatory framework that focuses on four dimensions。
First, it strengthens penetrating regulation and controls the “segregation of name”. Establish criteria for the substantive identification of science and technology finance operations, promote the true embedding of quantitative evaluation tools, such as “innovation credits”, into investment decision-making processes rather than post-postmarking, and implement a check-out or disincentive mechanism for long-term non-compliance。
Second, strengthening policy arbitrage and closing institutional gaps. Improving the eligibility and after-action mechanisms for s & t financial incentives, enhancing the physical penetration of funds, preventing the use of "s & t labels" as a arbitrage channel, and penalizing the fraudulent exploitation of policy dividends by fictitious technological attributes。
Third, the development of dynamic monitoring tools for appropriate technology assets to address the risks of uncontrolled investments. In response to concentration risk, a monitoring system covering indicators such as patent conversion rates and valuation rate increase deviations, technology asset mortgage rates and real liquidity matching is constructed to identify, in a timely manner, excessive concentration of resources and duplication of investment trends on popular tracks。
Fourth, explore countercyclical early warning mechanisms to value risk. In response to the “non-linear valuation” feature of the science and technology project, early warning of technological maturity and deviation from market valuation is established to alert foam risk when market emotions are overheated, to identify undervalued high-quality targets when market emotions are cold, and to avoid procyclical behaviour that exacerbates market volatility。
The above four dimensions respond to four types of risk — penetrating regulatory “no-no-no-no-no-no-no-no-no-no-no-no-no-no-no-no-no。
The original innovation is the “root” and “spirit” of the technological power. The creation of a science and technology finance ecosystem that supports “from 0 to 1” original innovations is essentially about adapting the financial system to innovation, rather than confining innovation to financial inertia. There is therefore a need to construct an ecosystem that is inclusive of failure, understands technology and accompany long run. Let science and technology finance truly be the “sympathetic” of original innovation。
