Domestic Banks Increase Lending Efforts in Technology Innovation Sector; Tech Financing Becomes Priority

Reuters reports that banking officials say Chinese financial institutions plan to allocate more funds to technology and innovative companies in response to government commitments to vigorously adopt artificial intelligence (AI) across the economy and lead emerging industries.

According to reports, the process of shifting credit allocation toward the tech sector has fully begun. Officials from large state-owned banks revealed that tech financing has become a priority for new loans this year, with the banks increasing support for advanced manufacturing, AI, and biotechnology sectors. They are also exploring the launch of new credit products specifically targeting tech startups, offering lower interest rates.

A corporate loan manager from a joint-stock bank in Jiangsu disclosed that the bank aims for a 30% increase in new loans to high-tech and innovative companies by 2026, up from about 20% last year.

Amid the real estate debt crisis and economic slowdown, this provides new growth points for banks, but analysts warn that the startup nature of these target companies and the lack of proper collateral for some may pose asset quality risks.

Gavekal Dragonomics China financial analyst said that this shift is essentially the result of the combined effects of real estate adjustments and policy requirements. The real estate sector is too challenging for large-scale lending. Meanwhile, regulators are actively promoting financial technology development by setting various assessment indicators, and banks are indeed working to develop loan products suitable for high-tech companies.

Data from the People’s Bank of China shows that last year, about 8% of credit was extended to high-tech innovative enterprises and small- and medium-sized tech companies, while real estate loans accounted for approximately 19%.

Ming Tan, a director at S&P Global Ratings, pointed out that although tech loans make up a small proportion, some loans may face issues, especially in overcapacity industries.

Gary Ng, senior economist at Crédit Agricole CIB, believes that compared to traditional industries, many tech startups are in early stages, operating with negative cash flow, higher failure rates, and often using intellectual property as collateral. These factors make it difficult for banks to assess their business prospects and potential recoveries.