Wang Ke, senior director of Shanghai-based Gopher Asset Management, said that there is much room for growth of China's S fund market, given its low penetration rate and PE firms' high demand for profitable exits from their investments.

The focus on S fund development is just one example of Shanghai's recent efforts to improve its financial ecosystem for technologically advanced enterprises.

A new board for small and medium-sized companies specializing in niche sectors, commanding high market share and boasting strong innovation capacity, started trading at the Shanghai Equity Exchange or SEE — it is different from the Shanghai Stock Exchange — on March 26, with the first batch of 162 companies successfully listed.

The new board is directly connected to the China Securities Regulatory Commission, the country's top securities watchdog, by using blockchain technology, said Guan Xiaojun, president of Shanghai Exchange Group, the parent company of the SEE.

Such a connection can help more companies specializing in frontier technologies but still in their early stage of development, and those with much growth potential, as they will be brought under the regulatory radar. In other words, the candidate pool for listed companies will be expanded, which is conducive to improving the quality of listed companies, he said.

The new board provides extensive services, including PE financing, credit financing and bond financing.

Shanghai Nutshell Therapeutics Inc, which invents small molecules in the realm of drug discovery fostered by protein dynamics, is one of the first companies to be listed on this new board.

According to Nutshell Therapeutics' founder Zhang Jian, the company, founded in 2013, is now at a critical moment of advancing its research results from preclinical stage to clinical application.

"A large amount of financial support is vital at this stage. To be listed on the new board not only connects us with more capital, but also offers various industrial resources," he said.

Traditional financial institutions have also stepped up their efforts to nurture technology startups in Shanghai.

When Zhang Qianwu, an associate professor with Shanghai University, teamed up with his partners to set up a new business in 2022 to develop a laser communication machine for inter-satellite communication, the lack of financial support was the biggest hurdle, especially because SMEs lacked collateral for bank loans.

But China Construction Bank's Shanghai branch stepped in by providing 3.5 million yuan in credit to Zhang's startup. The technology speaks for itself and can suffice as collateral, said the bank.

By the end of 2023, more than 5,000 local tech-focused companies had benefited from the special technology credit plan of CCB's Shanghai branch. Some 2,014 firms were newly included in the plan last year.

Integrated circuits, biomedicine and artificial intelligence are the major sectors that the Shanghai branch of Industrial and Commercial Bank of China focuses on, as part of its efforts to facilitate the development of "hard technologies", said the branch's deputy head Xu Yanfeng.

Bank loans worth more than 56 billion yuan have been provided to local companies specializing in the above three areas. Meanwhile, the branch has also extended its financial services to over 80 percent of the "hard technology" companies based in Shanghai, said Xu.

Cheng Fengchao, a member of the academic advisory committee at the China Association for Public Companies, said a multilevel capital market rich in various products can provide all-round financial services to technology companies.

"VC (venture capital) and PE firms provide capital to technology firms during their early-stage development, helping them with R&D and market promotion. Bonds and real estate investment trusts can provide long-term and stable financing for industrial parks and R&D centers, which form the fundamental infrastructure needed for technology innovation. The derivatives market can help companies effectively manage the risks in raw material prices and foreign exchange," he said.

"It is when companies properly address the various uncertainties in the market and technology development that innovation can be carried out without interruptions."

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