Prof. GuoWenjun's proposal to deepen the "investment and loan linkage" in Wuhan was adopted by the mayor


News Network, Comprehensive Phoenix Network and Physics Piovt(Zhidian) Mag. reported that the Thirteenth Party Congress of Wuhan first proposed the development of new private economy in January 2017. During the Second Meeting of 13th Wuhan Municipal Political Consultative Conference, Prof. WenjunGuo, a member of the standing committee of Municipal Political Consultative Conference, Vice Chairman of the Wuhan Zhizhi Association, and a professor at Zhongnan University of Economics and Law, called forthe creation of a “new private economy” highland,which needs further deepening of the investment and loan linkage pilot to alleviate the difficulties in financing of small and medium-sized enterprises. In the meeting of the mayor and members of Municipal Political Consultative Conference, GuoWenjun was invited to discuss the proposal with Mayor Wan Yong, some of which were accepted by the mayor on the spot.

In 2016, China's first batch of investment and loan linkage pilots was conducted in 5 national independent innovation demonstration zones and 10 banks, including Wuhan East Lake national independent innovation demonstration zone, and four banks such as Hankou Bank and Bank of China’s Hubei Branch.This reform has great practical significance for Wuhan's implementation of financial support for the economic development of the entity and widespread entrepreneurship and innovation, and is also an important tong for Wuhan's scientific and technological financial innovation. With the gradual advancement of this pilot reform, Wuhan small and medium science and technology innovation enterprises will have more opportunities for financial support during the initial and growth stages.

GuoWenjun said that investment and loan linkage refers to an investment model that the banks, according to the institutional arrangement based on the optimal allocation of risks and benefits, adopt equity and creditor's rights to provide financial support for SMEs, and cover the credit riskthrough equity investment income. At present, there are still deficiencies in Wuhan since the pilot reform of “investment and loan linkage”. First, the conditions for obtaining risk compensation for “investment and loan linkage” are stringent, and there is a mismatch in time between the risk compensationthe and non-performing loan control and performance assessment of commercial banks. Second, the number of sub-products developed by investment and loan linkages is small, and the connection with multi-tiered capital markets is not active enough. Third, the participants of the “investment and loan linkage” collaborative innovation platform are not widely used, which is not conducive to the effective integration of related resources. Forth, under the internal “investment and loan linkage” model, the risk isolation mechanism at both ends of investment and credit is not sound enough, leading to the lack of mechanism to control risks with a reasonable ratio of equity and credit.

Guojun Wen stated that the creation of a investment and loan linkage information sharing platform and the establishment of perfect related intermediary service systems, on one hand, are conducive to the external information exchange between equity investment institutions and banks under the investment-lending-linkage model, to the promotion of the effective integration of financial resources and to the improvement of the efficiency of investment and loan linkage, which also facilitates the supervision and timely resolution of risks arising from information asymmetry. On the other hand, the establishment of the platform will help strengthen the linkage between commercial banks and stock exchange corporations as well as related intermediary agencies, actively helping the invested companies to connect with multi-level capital markets.

GuoWenjun also suggested that in order to deepen the pilot reform of “investment and loan linkage”, we should appropriately relax the conditions for the risk compensation of it, and widen the policy support; we should adhere to the principle ofdirectional pilot, prudent promotion and professional management, and carry out risk isolation to effectively manage risks; we should open “investment and loan linkage” and “insurance linkage” to better spread risks; we should cultivate and introduce complex technology finance talents suitable for “lending to loans and loans” business, and reward incentives and equity incentives to attract and retain relevant outstanding talents; we should make full use of the “shuangzi” policy(construction of free trade pilot zones and national independent innovation demonstration zones) , and accelerate the innovation of a series of supporting systems related to “investment and loan linkage”.