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China has granted approval for the initial batch of financial asset investment companies after an eight-year hiatus. Experts suggest that these new entities will primarily focus on small and medium-sized businesses in vital sectors such as technological innovation, environmental sustainability, and low-carbon initiatives, as well as SMEs with specialized innovative expertise in their niche markets.
The first group of three joint-stock banks receiving official approval has identified technology finance as their main strategic focus. An analyst from the Shanghai Academy of Finance and Law noted that these banks also bring extensive experience in the integrated operation of investment and commercial banking.
On November 23, two prominent banks announced that their asset investment subsidiaries had received regulatory approval to begin operations. Additionally, another bank’s asset investment unit had already launched earlier in the month.
A staff member at a joint-stock bank explained that technology-oriented companies tend to be asset-light with rapid growth, often lacking sufficient collateral. Traditional credit models, which rely heavily on collateral, make it difficult for these high-potential firms to secure appropriate financial support that aligns with their growth stages.
As part of the banking ecosystem, asset investment companies offer a formalized, compliant pathway for bank funds to reach these high-tech firms. This approach marks a significant shift from restricted to accessible investments, allowing lenders to generate returns as companies expand and better align risks with potential benefits.
Experts indicated that these banks share a consistent approach centered on innovation in their investment philosophy. They aim to break through the limitations of traditional credit systems by combining equity and debt strategies to provide more comprehensive support for corporate financing.
This “equity plus debt” approach not only enables banks to earn investment returns but also transforms their roles within the industry, shifting from mere capital providers to value-adding partners in the supply chain, according to a researcher from Suzhou Commercial Bank.
Back in 2017, the first approval was granted to state-owned giants such as Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China to establish asset investment companies.
Following years of pilot programs led by these institutions, the acceptance of joint-stock banks forming subsidiaries signifies that the asset investment company model has moved beyond experimentation into broader implementation.
The Postal Savings Bank of China, which is currently the only major state-owned commercial bank without an operational asset investment subsidiary, received approval last month to begin preparations for establishing one.
More commercial banks are expected to be authorized in the future to set up asset investment subsidiaries, according to a researcher from the Postal Savings Bank.
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