In today’s digital era, where smartphones and other electronic devices have become indispensable, the significance of technology, particularly in the form of microchips, has grown exponentially.
The backbone of connectivity, these chips have evolved significantly, shrinking in size while expanding in complexity. According to Hu Xiao, Director of the Securities Business Department at Shanghai-based Advanced Micro-Fabrication Equipment Inc China, a chip used in smartphones now hosts over 10 billion transistors, each requiring sophisticated equipment like photolithography and laser etching machines for production.
The capital-intensive nature of chip manufacturing poses a challenge for breakthroughs in the industry. Hu emphasizes the immense investment required, often beyond the capacity of conventional enterprises. Thus, there’s a crucial role for the capital market to play in fostering such advancements.
Yang Fu, Executive Vice-President of chip design company UNISOC, stresses the necessity of continuous capital injection for technology-intensive sectors like integrated circuits. A market environment conducive to technological fluctuations is equally vital, she asserts.
In this context, insurance capital emerges as a strategic ally due to its patient nature and commitment to long-term investments. Liu Fan, Vice-President of China Life Asset Management Co Ltd, highlights the compatibility of insurance funds with technological industries’ financing needs. Notably, China Life Asset Management Co Ltd ventured into a novel approach by establishing a secondary fund to invest in emerging sectors like integrated circuits.
This secondary fund, known as the “S fund”, involves purchasing equities from government-backed funds, facilitating capital liquidity through private equity trading in the secondary market. Liu emphasizes the adaptability of insurance capital across the technological life cycle, citing the S fund as a prime example.
Furthermore, S fund serves as a conduit for capital transition from local governments to insurance entities, fostering industry development from its nascent stages to maturity.
Beyond the S fund, CLAMC has diversified its investment tools to channel more capital into emerging industries. Examples include equity investments in China Electronics Corp for CPU production and asset-backed plans supporting manufacturing giants like Sany Group and XCMG Machinery.
In April, a joint plan by regulatory bodies aimed to deepen financial services in the manufacturing sector, emphasizing insurance capital’s role in providing stable, long-term support through various investment avenues.
Zhuang Siliang, Senior Vice-President of CLAMC’s innovative investment business, underscores the urgency of investing in China’s burgeoning economic sectors. He stresses the responsibility of insurance firms in bolstering the development of new productive forces.
China Life Group has responded to the evolving technological landscape by offering specialized insurance policies tailored to technology-oriented enterprises, such as biopharmaceutical and aerospace companies. Liu Zhe, Deputy General Manager of China Life Property and Casualty Insurance Co Ltd, highlights the insurer’s commitment to developing policies addressing risks associated with technology R&D, aligning with the government’s initiatives to support key industries.
In conclusion, the symbiotic relationship between insurance funds and technological innovation underscores the pivotal role of financial institutions in driving economic transformation and sustaining long-term growth.
