SSE Bonds | Utilizing the Policy Package: Sci-Tech Innovation Bonds Propel Rapid Participation of Innovation Entities

Translated from Xinhua Finance, by Yang Yiren

Since the pilot program launched in 2021, sci-tech innovation bonds have developed into a market exceeding RMB one trillion, entering a "golden age" characterized by quality improvement and capacity expansion. As an important tool for the capital market to empower sci-tech innovation, sci-tech innovation bonds allow companies to issue bonds based on "soft power" such as technical value and team capabilities, which fits their R&D cycle and avoids missing opportunities for technical breakthroughs due to short-term capital chain ruptures. In the future, more social capital will be absorbed to help the development of sci-tech innovation.

Policy package promotes the expansion of sci-tech innovation bonds

On April 25, the Political Bureau of the CPC Central Committee proposed to launch an innovative science and technology board in the bond market. On May 7, the central bank and the China Securities Regulatory Commission jointly issued a document to broaden the financing channels for sci-tech enterprises and support three types of entities to issue sci-tech innovation bonds. Subsequently, the Shanghai Stock Exchange (SSE), Shenzhen Stock Exchange (SZSE), and Beijing Stock Exchange (BSE) quickly followed up on the implementation details. As the "pioneer," the SSE led the way by piloting in 2021 and officially launching special corporate bonds in 2022. Since then, it has assisted nearly 300 companies in issuing sci-tech innovation bonds totaling over RMB one trillion, achieving an average annual growth rate of approximately 75% from 2022 to 2024.

Many companies have reduced their financing costs through sci-tech innovation bonds and obtained diversified and stable financial support. Since 2022, SDIC has issued a total of RMB 9.5 billion in sci-tech innovation bonds, focusing on four major business sectors: "energy industry", "digital/technology", "public welfare and health" and "industrial finance". This initiative has boosted investment in sci-tech innovation and reinforced the leading role of state-owned capital in key areas. On January 14, 2025, Dongfeng Motor Group successfully issued RMB 1.6 billion in 3-year sci-tech innovation bonds with a coupon rate of 1.70%. The issuance aims to foster the growth of the sci-tech innovation industry and the upgrading of the automobile sector. In July 2024, Shandong Hongqiao New Materials Co. Ltd. issued RMB 500 million in sci-tech innovation bonds to ensure R&D funding needs and optimize the debt structure.

Sci-tech innovation bonds are expected to experience explosive growth

Under the favorable policy conditions, all issuers have responded positively. Many securities companies plan to issue over RMB 16 billion in sci-tech innovation bonds on the SSE, and technology-based enterprises along with equity investment institutions are also taking action. More than RMB 10 billion in sci-tech innovation bonds have already been announced for issuance. Enterprises are keen on sci-tech innovation bonds because they help optimize debt structure and alleviate short-term capital pressure. These bonds typically have medium- to long-term maturities ranging from 3 to 10 years, aligning well with the needs of sci-tech enterprises. Additionally, the financing costs are relatively low. For instance, Shanghai State-owned Capital Investment Co., Ltd. issued 15-year sci-tech innovation bonds worth RMB 5 billion with an interest rate of just 2.1%. CICC predicts that the issuance of sci-tech innovation bonds will experience a period of intensive growth.

Finance empowers sci-tech innovation to lead industrial upgrading

Looking to the future, sci-tech bonds will better serve sci-tech innovation. SDIC will rely on sci-tech innovation bonds to support core technology research and promote industrial upgrading. Dongfeng Motor Group plans to leverage the bond market to explore innovative financing, enhance technology research and development, cultivate talent, and protect intellectual property, ensuring that sci-tech innovation bonds effectively support sci-tech advancements.

The above information is provided for reference purposes only and does not constitute investment advice.