Injecting certainty into future industry development through institutional innovation

Securities Times Reporter He Jueyuan Guo Bohao

Future industries represent the direction of a new round of technological revolution and industrial transformation, with a high degree of uncertainty being a significant characteristic that distinguishes them from emerging industries and traditional industries. The uncertainty of investment returns causes capital to be “afraid to invest” and “unwilling to invest,” while the changing technological routes lead to high trial-and-error costs for enterprises. The “14th Five-Year Plan” outline requires the “establishment of a mechanism for investment growth and risk sharing in future industries,” aiming to hedge the uncertainty in the development process of future industries through institutional design certainty.

Future industries are driven by cutting-edge technologies and cover key areas such as quantum technology, bio-manufacturing, hydrogen energy and nuclear fusion energy, brain-computer interfaces, embodied intelligence, and sixth-generation mobile communications. Officials from the Ministry of Industry and Information Technology have pointed out that China has comprehensive advantages such as a complete industrial system, a large-scale industry, and rich application scenarios, providing fertile ground for the development of future industries. However, the development of future industries in China also faces issues such as insufficient systematic planning and an unstable technological foundation.

Currently, the development of future industries in China mainly relies on fiscal and state-owned capital investment, with insufficient participation from social capital, and a lack of investment in original innovation and pilot development stages. Breaking the dependence on fiscal funds, encouraging various operating entities and social capital to actively participate, and stimulating the vitality of enterprises as innovation entities are key to promoting the development of future industries.

The solution lies in bridging the misalignment between the high-risk characteristics of future industries and the risk-averse nature of capital. On one hand, a growth mechanism for investment addresses the financing dilemma of “where does the money come from”; on the other hand, a risk-sharing mechanism alleviates concerns about “being afraid to invest.”

Establishing a growth mechanism for investment focuses on creating a situation where “the government guides, the market leads, and multiple parties collaborate.” In light of the long cultivation cycle and high risks of future industries, it is necessary to strengthen patient capital and establish more guiding funds that are suitable for the long cycle of future industry development. Through a “mother fund + sub-fund” structure, social capital can be leveraged for “follow-up investments” and “long-term investments,” forming a relay of funds. It is also essential to innovate financial tools, develop exclusive products such as “intellectual property pledges,” and guide financial resources to accurately drip-feed startups. Furthermore, it is crucial to deepen the reform of converting fiscal funds from grants to equity investments, establishing a virtuous cycle of “investment—exit—recycling” for fiscal funds, ensuring continuous generation of funds.

Establishing a risk-sharing mechanism focuses on creating a multi-party sharing system with clear rights and responsibilities, shared risks, and shared returns. It is necessary to promote the joint assumption of innovation risks by the government, enterprises, financial institutions, and research institutes to reduce the trial-and-error costs for a single entity. Different assessment criteria should be implemented for government investment funds and state-owned capital investing in future industries, establishing a fault-tolerance mechanism centered on compliance responsibility exemptions, fostering a good atmosphere that encourages innovation and tolerates failure. At the same time, it is essential to implement support policies for the first set of equipment, the first batch of new materials, and the first version of software, addressing key bottlenecks between technology maturation and market validation. The certainty of application scenarios can hedge against the dual uncertainties of technology and market, further solidifying social capital’s confidence and return expectations.

The implementation of the investment growth and risk-sharing mechanisms also requires a mature industrial ecosystem as support. Currently, China’s future industry ecosystem is relatively weak, and it is necessary to cultivate and grow leading technological enterprises and unicorns to play their role as “chain leaders”; promote small and medium-sized enterprises to follow specialized and innovative paths, focusing on breaking industry barriers and facilitating the free flow of elements such as talent, capital, and data within the ecosystem.

The “14th Five-Year” period is a critical window for establishing future industry layouts. Establishing investment growth and risk-sharing mechanisms not only supports industrial development at the financing level but also lays a solid institutional foundation for the entire chain of innovation in future industries, helping China seize opportunities and gain initiative in the new round of global technological revolution.

(Editors: Wang Zhiqiang HF013)

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