Text · Ren Xu, Lin Fanghong, Liu Peng
State-owned Assets Report Magazine Issue 7, 2024
In February 2023, the State-owned Assets Supervision and Administration Commission of the State Council issued the Notice on Matters Concerning the Investment Management of Central Enterprises and the Further Expansion of Effective Investment in 2023 (hereinafter referred to as the "Notice"), requiring the expansion of effective investment as one of the priorities of central enterprises. Central enterprises should focus on the national strategy of manufacturing power and quality power, focus on key areas such as major national projects, infrastructure construction, and strengthening the industrial chain, optimize the direction of investment layout, improve the quality of effective investment, and drive investment in the whole society. On December 25, 2023, the State-owned Assets Supervision and Administration Commission of the State Council held a meeting of the heads of central enterprises to study and deploy the "six focuses" key tasks in 2024, and clearly proposed that central enterprises should focus on improving quality and efficiency, solidly promote high-quality and stable growth, and effectively play a key role in effective investment. It can be seen that expanding effective investment will become a key task for central enterprises to adhere to for a long time in the future. At present, central enterprises are facing two problems in carrying out investment in scientific and technological innovation. First, some central enterprises rely on the gradual innovation of introduction, imitation and re-innovation, and lack of disruptive innovation. Second, scientific and technological innovation requires a large amount of capital investment and has a large risk of failure, which is easy to cause the loss of state-owned assets, and to a certain extent, inhibits the willingness of enterprises to invest in scientific and technological innovation. Therefore, it is necessary to develop a new investment model for scientific and technological innovation, effectively reduce the investment risk of central enterprises, and improve the efficiency of scientific and technological innovation investment.
The central enterprises independently innovate the investment model
Led by central enterprises, according to the strategic guidance and policy guidance of national ministries and commissions, the upstream and downstream entities of the industrial chain are united to form an independent technological innovation investment model. In the downstream, the central enterprises provide users with technology and products, obtain demand feedback from users, and clarify the direction of technological innovation in combination with national strategies and policies. In the upstream, the central enterprises cooperate with scientific research institutes and suppliers to carry out technical research, and solve the principles and technical problems at the front end of product production through the investment in the principle research projects of scientific research institutes and the research and development of technical products of suppliers. Then use its own information integration and technology co-ordination capabilities to develop products or scientific and technological achievements that meet the needs of national strategies and users. Figure 1 shows the specific operation process of the mode.
Fig.1 The model of the central enterprise innovation consortium emphasizes the linkage of the upstream and downstream roles of the industrial chain and the feedback of scientific and technological information, gives full play to the technological innovation advantages of each role in the whole industrial chain, helps to promote the rolling innovation of technology, and quickly puts it into product production and use, which not only ensures the sustainability of innovation achievements, but also ensures the market applicability and benefits of innovative products. The investment model has certain reference value for accelerating the research and development of major technical equipment of central enterprises in energy, metallurgy, forging, petrochemical, engineering and other industries, making up for the shortcomings of the mainland machinery industry, and further enhancing the research and development strength of national defense industry enterprises.
The investment model of the joint innovation fund of the digital intelligence project
A number of central enterprises have jointly funded the establishment of the "Digital Intelligence Project Joint Innovation Fund" with R&D expenses to invest in the R&D and application projects of digital intelligence technology jointly applied by a new generation of information technology enterprises and fusion enterprises. This model draws on the experience of the Israel and United States joint BIRD fund, and the new generation of information technology enterprises and fusion enterprises that meet the application conditions jointly serve as the applicants, and submit the project application to the "joint innovation fund" (including the qualification and strength of the enterprise, the basic information of the project, the innovation points, the key technologies to be conquered, and the integrated application plan of the technology in key areas, etc.), and after the preliminary review and expert demonstration are completed, the project will be funded by the fund to carry out project research. The new generation of information technology enterprises should have the R&D and manufacturing capabilities of the new generation of information technology such as 5G, Internet of Things, and big data. Convergence enterprises should have the development needs of digital intelligence, and have the ability to define, use, sell and serve digital intelligence projects. The two applicant enterprises jointly undertake the work of technological innovation research and development, product manufacturing and project commercialization of digital intelligence projects, share profits and intellectual property rights of innovation achievements, and share R&D risks. The funded projects should belong to the new generation of information technology development, information technology cross-industry integration application research and development and other digital intelligence projects, and should also belong to the main business scope of the central enterprises, meet the national strategic needs, and have greater development potential, profitability and social benefits. The "Joint Innovation Fund" is a conditional funding, and the central enterprises, as the R&D investors of the digital intelligence project, will share the project benefits with the applicant enterprises. Figure 2 shows the specific operation process of the mode.
Figure 2 Joint Innovation Fund for Digital Intelligence Project of Central Enterprises
For example, a central enterprise in the field of rail transit equipment such as Internet of Vehicles (IoV) and vehicle chips jointly applied by Huawei Technologies Co., Ltd. (hereinafter referred to as "Huawei") and a company engaged in vehicle technology development under a central enterprise in vehicle production (hereinafter referred to as "Vehicle Technology Company") jointly applied for by Huawei Technologies Co., Ltd. (hereinafter referred to as "Huawei") and a company engaged in vehicle technology development under a central vehicle production enterprise (hereinafter referred to as "Vehicle Technology Company"). As a next-generation information technology company, Huawei undertakes the project research and development work, and the vehicle technology company, as an integrated enterprise, promotes the use, manufacturing, service, and commercialization of R&D results. After the success of the project, Huawei and the vehicle technology company will share the intellectual property rights and benefits of the project, and the vehicle production enterprises will also obtain the intellectual property rights through their subsidiaries, and the other central enterprises will enjoy the commercial profits of the project results. This model has the following characteristics: First, the R & D expenses of central enterprises are used as the source of funds, which can effectively avoid the potential risk of loss of state-owned assets in scientific and technological innovation investment and increase the willingness of central enterprises to invest in scientific and technological innovation. Second, joint investment helps to expand the scale of the joint innovation fund's capital pool, which can not only save the cost of the project R&D company, but also reduce the financial pressure of the central enterprises to use the R&D expenses to fund separately, and provide an opportunity for a number of central enterprises to share the benefits of scientific and technological R&D results. Third, the joint applicant model provides a good platform for enterprises to cooperate in science and technology. This model helps to make up for the shortcomings of scientific and technological research and development of a single enterprise, and gives full play to the complementary role of resources and functions between different enterprises. The digital intelligence project can be jointly applied by the subsidiaries of central enterprises and private enterprises, the subsidiaries of central enterprises provide technology product markets and application scenarios, and private enterprises complete technology research and development and application scheme design, which not only helps to absorb the advantages between central enterprises and private enterprises, accelerate the formation of scientific and technological innovation achievements and benefits, but also provides a good way for central enterprises to absorb the R&D experience of advanced private enterprises such as Huawei. The investment model of the joint innovation fund of digital intelligence projects is of reference significance for central enterprises in construction, transportation, energy, petrochemical, metallurgy and other industries to strengthen the R&D investment of a new generation of information technology such as big data, Internet of Things, blockchain and artificial intelligence, strengthen the production and application of digital intelligence technology, and build industrial platforms such as industrial Internet, big data platform and intelligent production platform.
High-tech innovation private equity fund injection incubation model
Through the high-tech investment company under the central enterprise, absorb other social capital to jointly invest, establish a high-tech innovation private equity fund, and incubate the technology research and development projects declared by scientific research institutes and enterprises with equity investment, and finally achieve the goal of harvesting scientific research and technological achievements and investment income dividends. The innovative private equity fund adopts the form of a limited partnership, with an enterprise with less capital contribution but investment management experience and ability as the general partner, and the investment company under the central enterprise invests a larger part of the capital as a limited partner. The partners' meeting is the highest authority of the fund, and the partners exercise their voting rights according to the amount of paid-in capital. The innovative private equity fund receives investment proposals for high-tech projects from central enterprises, scientific research institutes and private enterprises, and incubates feasible projects and provides resource support after the partners' meeting and external experts strictly demonstrate the market potential of the project, the ability of the development team, the technical feasibility and the return on investment. During the investment period, the innovative private equity fund, as a shareholder, has the right to track, intervene and supervise the invested enterprises and projects, ensure the harvest of technological research and development results and corporate income dividends, and finally complete the investment exit. Especially for the technology-based private enterprises with good development prospects, strong technical advantages, and help to make up for business shortcomings, the central enterprises can absorb the enterprise as its high-tech subsidiary through the "reverse mixed reform" model, so as to further enhance the scientific and technological and operational strength of the enterprise. Figure 3 shows the specific operation process of the mode.
Figure 3 The incubation model of high-tech innovation private equity fund
In terms of carrying out innovative private equity fund models, there have been active attempts within central enterprises. CRRC Capital, a wholly-owned subsidiary of CRRC, as a limited partner, and partners such as the United Nations Coordinated Development Fund Co., Ltd., established Huayu High-tech Traffic Control (Wuhu) Industrial Chain Investment Fund, focusing on rail transit, new energy, new materials, advanced manufacturing, semiconductors, and a new generation of information technology industries. The fund is of positive significance for CRRC to accelerate the layout of emerging industries and promote the effective integration of industrial capital in the future, and the relevant experience is worth further promoting. In terms of the practice of the "reverse mixed reform" model, SDIC Group has actively explored in recent years, and has successively absorbed high-quality high-tech enterprises such as Hefei Bolin, Meiya Burke, and Shenzhou High-speed Railway in the "reverse mixed reform" model, and has made important contributions to promoting the development of key areas such as R&D and manufacturing of key materials, big data technology and rail transit operation and maintenance, and giving full play to the main role of central enterprises in scientific and technological innovation. The private equity fund model allows the expansion of investment funds, which helps to further expand the scale of the fund, and the central enterprises can absorb high-quality social capital with relatively little investment, leverage large-scale funds, and give full play to the leverage role of central enterprise investment. Compared with the corporate type, the partnership private equity fund can save corporate income tax, and at the same time, the information disclosure requirements are more relaxed, and the fund operation is more confidential and flexible. The limited partnership system is adopted, and the central enterprises, as limited partners, only bear limited liability according to the share of capital contribution, which effectively reduces the potential risk of loss of state-owned assets contributed by the central enterprises. The central enterprises can retain the right to supervise and make decisions on the operation of the fund through the partners' meeting to ensure the scientific and reasonable operation of the fund and its own interests. This model can fully tap the innovation potential of scientific research institutes and private science and technology enterprises, and can also provide a way for central enterprises to screen, cultivate and absorb high-tech private enterprises. The incubation model of high-tech innovation private equity fund injection has high reference value for central enterprises to invest in machinery industry, medical equipment, new energy, computer, semiconductor and chip and other short-board industries, accelerate the research and development of new materials, electronic components and equipment, emerging software and a new generation of information technology, and lay out strategic emerging industries. [Author Affilications:Ren Xu, Lin Fanghong,School of Economics and Management, Beijing Jiaotong University; Liu Peng, Guangjiao Guozi Information Service (Beijing) Co., Ltd.】