On April 30, the Political Bureau of the CPC Central Committee held a meeting. General Secretary Xi Jinping presided over the meeting to analyze and study the current economic situation and economic work. The meeting stressed the need to actively develop venture capital and expand patient capital.
What is "patient capital"?
As a professional term in the financial field, "patient capital" was mentioned at the meeting of the Political Bureau of the CPC Central Committee for the first time.
At the end of last year, after the Central Economic Work Conference, the China Securities Regulatory Commission, in accordance with the spirit of the conference, proposed that "vigorously promote the reform of the investment side, promote and improve the policy environment conducive to the entry of medium and long-term funds into the market, guide investment institutions to strengthen counter cyclical layout, and expand 'patient capital'". Among them, the expression "patient capital" has aroused widespread concern.
As the name implies, "patient capital" refers to long-term investment capital, and generally refers to funds that have a high tolerance for risk and a long-term outlook for capital return.
The industry believes that "patient capital" is usually not disturbed by short-term market fluctuations, can provide long-term stable financial support for investment projects, can play the role of market stabilizer and economic development booster, and thus promote the innovative development of enterprises.
What is the relationship between "patient capital" and the development of new quality productivity?
Scientific and technological innovation is the core element of developing new quality productivity. On September 8, 2023, General Secretary Xi Jinping proposed "new quality productivity" for the first time during his visit to Heilongjiang. The General Secretary stressed that we should integrate scientific and technological innovation resources, lead the development of strategic emerging industries and future industries, and accelerate the formation of new quality productivity.
New quality productivity is characterized by high technology, high efficiency and high quality. It is not a day's work to achieve scientific and technological innovation and technological breakthrough. It needs long-term and stable financial support.
As the main body of production and operation, enterprises play a key role in developing new quality productivity. However, due to the original and disruptive scientific and technological innovation activities, the uncertainty of innovation achievements is more prominent, and it is difficult to generate immediate return on investment. Most science and technology innovation enterprises that are still in the start-up stage usually face "growing pains" such as difficulty in financing and expensive financing.
To cultivate and develop new quality productivity, it is necessary to introduce more financial resources and guide the supply of long-term funds. Strengthening financial innovation and strengthening "patient capital" is an important engine to accelerate the cultivation of new quality productivity.
"Patience capital" is not only concerned with the short-term earnings of enterprises, but also focuses on the long-term. It comprehensively considers non-financial indicators such as technological innovation, leading edge, business model, etc. of enterprises, takes the development potential and long-term earnings of enterprises as confidence, and provides an endless source of capital for the development of new quality productivity.
How to strengthen "patient capital"?
Promoting efficient financial empowerment and new quality productivity is not only an important measure to deepen financial supply side structural reform, but also an important action to implement the spirit of the Central Financial Work Conference.
The expansion of "patient capital" can promote the reform of the investment side of China's capital market, which requires the coordinated efforts of the government, market, investment institutions and other parties. At present, some places in China have begun to explore ways and paths to strengthen "patient capital".
The Work Report of Shanghai Municipal Government in 2024 proposes to guide long-term capital, patiently invest capital early, invest in small, and invest in hard technology. In short, it is to encourage investment institutions to increase investment in start-ups, small and micro enterprises, and science and technology innovation enterprises.
In this regard, experts suggest that first, we should set performance evaluation criteria for the return on investment in a longer cycle for capital. The second is to build the vane of "early investment, small investment, hard technology investment" to serve the national strategy. Third, we will strive to create an atmosphere in which the government leads investment and institutions follow investment, guide investment institutions to focus on the long-term value of enterprises, drive more capital to become long-term capital and patient capital, and attract more investment institutions to layout long-term development in China.
Finance is the lifeblood of the national economy. A strong economy is more conducive to the cultivation of new quality productivity.
This meeting of the Political Bureau of the CPC Central Committee is a follow-up to the 2023 Central Financial Work Conference's request to "optimize the structure of capital supply and use more financial resources to promote scientific and technological innovation and advanced manufacturing". The CPC Central Committee further deployed finance to help foster new quality productivity and deeply stimulate the innovative potential of enterprises.
As the practitioners expect, to develop new quality productivity, science and technology and finance should be given equal importance. Actively developing venture capital and expanding patient capital are just the important measures for the financial industry to go "new" and vigorously serve the development of new quality productivity.
(CCTV Network of China Central Radio and Television Corporation)
[Editor in charge: Ning Yanli]
