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Practice path of promoting domestic listing of industrial Internet enterprises

Time : 07/01/2022 Author : xdecwk Click : + -
        In recent years, China has seized the development opportunity of digital economy, cultivated a number of excellent industrial Internet enterprises, injected new momentum into China's economic development, promoted China's economic transformation and upgrading, provided key support for the modernization of China's industrial chain supply chain, and also provided an important foundation for the high-quality development of the real economy. However, it cannot be ignored that most of these fast-growing industrial Internet enterprises are invested by US dollar funds, and some leading enterprises have also built a red chip structure and plan to choose the opportunity to list in the United States. In the current situation of increasingly fierce international competition, Chinese enterprises may face greater risks in listing in the United States. In order to improve the quality of listed companies, explore and resolve the overseas listing risks of high-quality red chip enterprises, meet the financing and development needs of industrial Internet enterprises, and take into account the strategic considerations of data and information security and financial security, it is necessary for China's capital market to learn from the experience and lessons of consumer Internet enterprises listed in the United States in the past two decades, and cooperate with the further deepening of the registration system reform, Speed up the construction of a market ecosystem that is compatible with the development of digital economy such as the industrial Internet, and support more relevant enterprises to list in China.
        Industrial Internet is the core part of industrial digitalization, a strong support for China's economic transformation and upgrading, and an important force to promote industrial reform. Its subdivisions mainly include digital manufacturing (Internet of things), SaaS (software service), artificial intelligence, industrial software, supply chain design, etc. it plays a significant role in improving the intelligence level of manufacturing enterprises, supporting the development of small and medium-sized enterprises upstream and downstream of the industrial chain, guiding the green and low-carbon of traditional industries, improving the efficiency of the supply chain, and promoting the "cost reduction, efficiency increase, quality improvement, innovation" of the real economy. The development of industrial Internet has accelerated the interaction between technology, industry and capital, attracted PE (private equity investment) /vc (venture capital) inflows, and formed distinctive advantageous plates in Beijing Tianjin Hebei, Yangtze River Delta and Pearl River Delta.
        According to preliminary statistics, 381 industrial Internet enterprises have received multiple rounds of pe/vc investment and developed well since 2014. These enterprises have not yet been listed, and have received about 1200 rounds of pe/vc investment, with an amount of more than 280billion yuan, and more than 80% of them are concentrated in Beijing Tianjin Hebei, the Yangtze River Delta and the Pearl River Delta urban agglomeration. In the Beijing Tianjin Hebei region, thanks to the relatively developed software industry, there are 18 SaaS enterprises, accounting for the highest proportion among the three regions of Beijing, Tianjin and Hebei. In the Yangtze River Delta region, there are many enterprises such as digital manufacturing (Internet of things), artificial intelligence and industrial software, with a total of 53, accounting for one third of the sample enterprises in the region.
        In the Pearl River Delta region, supply chain design enterprises are the most concentrated, with a total of 40, accounting for about half of the sample enterprises in the region. With the non-linear growth of industrial Internet industry driving effect, these three urban agglomerations have gathered technology, talents, enterprises and capital at a faster speed, further enriched the development ecology of industrial Internet, and significantly improved the toughness of China's industrial chain and supply chain. At present, the digital economy represented by the industrial Internet has become the core field for countries all over the world to compete for the right to speak. Europe and the United States and other countries have raised the development of industrial Internet to the height of national strategy. In the future, when China's industrial Internet enterprises develop to a certain level, they will be a powerful engine to realize the double cycle of economy internally and an important means to maintain China's international competitive advantage externally.
        However, "the industrial revolution has to wait for the financial revolution". Compared with other fields, industrial Internet enterprises integrate cutting-edge technology, industrial manufacturing and ecological construction, with larger investment, longer cycle, higher risk and stronger radiation driving effect. They need strategic, systematic and sustainable support from the capital market. The domestic capital market has limited coverage and attraction to industrial Internet enterprises. Some enterprises are mainly based on red chip structure, with the main goal of listing in the United States. At present, China's capital market has not yet formed a market ecosystem that matches the development of industrial Internet, with relatively insufficient coverage and limited attraction to high-quality enterprises. According to incomplete statistics, there are 47 Unicorn enterprises in the field of industrial Internet in China, accounting for about 15% of the total number of Unicorn enterprises in China, with a total valuation of nearly 1trillion yuan.
        Among them, 23 exclusive animal enterprises are mainly invested by US dollar funds, and 17 have built a red chip structure. Among the eight Unicorn enterprises in the field of artificial intelligence, four have built a red chip architecture. Six of the top 10 Unicorn companies with the highest valuation have built a red chip structure. Similar to previous consumer Internet enterprises, China's industrial Internet red chip enterprises are also more inclined to list in the United States. For example, man bang and graffiti intelligence have been listed on the New York Stock Exchange. According to statistics, after the introduction of the pilot scheme related to the domestic listing of red chip enterprises, 12 enterprises have retained the red chip structure and applied for listing in China with overseas entities, of which only 2 are industrial Internet enterprises.
        The reasons why industrial Internet red chip enterprises listed in the United States are also similar to previous consumer Internet enterprises. The main reasons are: first, the U.S. market has a higher degree of acceptance and recognition of emerging fields. As a typical representative of the digital economy, industrial Internet enterprises are more favored by investors and intermediaries, and have formed an obvious plate aggregation effect and demonstration effect. Listing in China needs to meet the requirements of high market value and operating income, while most industrial Internet enterprises are still in the stage of rapid growth and have limited profits. Second, industrial Internet enterprises have high risks, uncertain prospects and high cost investment during their start-up period, which makes it difficult to attract RMB funds. They mainly rely on US dollar funds to obtain financing support. Under China's existing foreign exchange management, issuance and listing, and share restriction systems, it is more difficult for us dollar funds to exit smoothly through domestic listing and realize earnings. Therefore, many industrial Internet enterprises are more willing to promote enterprises to list in the United States.
        Third, most red chip enterprises have built a vie framework (agreement control). At present, the relevant regulations on domestic listing are too general, lack of operating rules, and the treatment method is not clear. The supervision is basically "one enterprise, one policy", and the expectation of domestic listing of enterprises is not strong. Historically, most of the emerging enterprises in China's consumer Internet, biomedicine, new energy vehicles and other industries have been listed overseas. More than 500 have chosen the U.S. market, and the domestic market has missed a batch of high-quality listing resources, which to a certain extent shows that the domestic capital market's service weakness for the new economy has not been effectively addressed. At present, China has reached the key node of the rapid development of industrial Internet. In view of the great strategic significance of industrial Internet, it is necessary for China's capital market to increase support for high-quality enterprises in this field as soon as possible.
        First, we need to solve the financing needs of enterprises and the withdrawal of PE shareholders as soon as possible. A considerable number of industrial Internet start-ups in China mainly rely on pe/vc to obtain funds. With the development and expansion of enterprises, the demand for funds is more urgent and larger, and pe/vc invested in the early stage is also facing increasingly prominent exit pressure. If it cannot be listed and financed in time, the future development of the enterprise and the exit of pe/vc will be adversely affected. Moreover, since the customers of industrial Internet enterprises are all b-end, mainly small and medium-sized enterprises, a large number of small and medium-sized enterprises in the upstream and downstream of the industrial chain will also face the chain effect. Second, we need to ensure the security of information and data.
        The business of China's industrial Internet enterprises is basically in China, and they have a large number of data in the field of industrial manufacturing and circulation. The data of industrial Internet is diverse and involves a wide range, and the requirements for information and data security are higher than those of consumer Internet. Although China has promulgated the data security law of the people's Republic of China to strictly control data cross-border, the United States' foreign company Accountability Act requires the submission of the audit working paper of zhonggai company. In the case of positive contradictions between the regulatory policies of the two countries, it is difficult for enterprises to meet the requirements of information disclosure and ensure the security of information and data when listing in the United States, which is easy to cause hidden dangers to the data security of China's industrial Internet.
        Third, China's domestic capital market needs to retain more high-quality enterprise resources and improve the quality of listed companies and investors' sense of gain. At present, only 69 listed companies in China are mainly engaged in industrial Internet business, and most of them are general equipment manufacturing enterprises such as Hikvision and Huichuan technology, with a relatively single format. Compared with the relatively distinct plate agglomeration effect overseas, the domestic market has a small number of Listed Companies in some important sub sectors, such as SaaS, artificial intelligence, industrial software and supply chain design, and lacks leading enterprises. According to statistics, 50% of the market value of the top 20 listed companies in U.S. technology stocks is covered by seven industrial Internet related enterprises.
        There are more than 50 listed companies in the SaaS field, including salesforce with a market value of more than $250billion, Shopify with a market value of nearly $200billion and servicenow with a market value of more than $100billion. Industrial Internet enterprises have both "industrial" and "Internet" characteristics. Once they break through the explosion point of the industry, they may grow into excellent enterprises with benchmarking effect. Fourth, we need to explore more ways to resolve the stock risk from the source. Although China's regulators have been actively coordinating, the delisting risk of China concept shares is still variable. Although the Hong Kong market can provide the share transfer function for China concept shares, its financing function is limited, and it is difficult to accept more enterprises in the short term.
        The domestic market has better liquidity and strong financing function. Taking promoting the domestic listing of industrial Internet red chip enterprises as a breakthrough, it can provide more options for solving the problem of China concept shares. First, introduce more flexible conditions for domestic issuance and listing of red chip enterprises. Industrial Internet enterprises are characterized by longer market cultivation cycle, more financing rounds, faster frequency, and continuous exploration of technology and business models. According to its development characteristics, it is suggested to introduce more flexible issuance and listing conditions for high-quality red chip enterprises, and increase consideration of enterprise R & D investment, growth, status and role in the process of industrial chain reconstruction while reducing the requirements of financial indicators.
        Second, strengthen the coordination between ministries and commissions to further improve the operability of the rules related to the domestic listing of red chip enterprises under the vie framework. It is suggested that the CSRC, the national development and Reform Commission, the Ministry of Commerce and other relevant departments should clarify and unify relevant standards, requirements and audit processes to form clear rules and guidance. Third, support unprofitable industrial Internet enterprises to list on the science and technology innovation board and the gem. The essence of industrial Internet is to promote the deep integration of traditional industries with big data, cloud computing, blockchain and other digital technologies, and empower the transformation and upgrading of traditional industries, which is just in line with the positioning of science and technology innovation board and gem. It is suggested to focus on the following two types of enterprises: first, industrial Internet platform enterprises (including SaaS) that serve the digital transformation of small and medium-sized enterprises, such as smart bud, helcaos, etc; Second, supply chain design enterprises that focus on vertical segmentation of traditional industries, digitalization and large business scale, such as leading enterprises in the textile industry, hardware industry, auto parts industry and other fields.
        First, focus on the advantageous areas of Beijing Tianjin Hebei, Yangtze River Delta and Pearl River Delta, and guide RMB pe/vc to invest in early industrial Internet enterprises. There are many central enterprises in Beijing Tianjin Hebei and Yangtze River Delta, the underlying technology of industrial Internet is relatively developed, and the new generation of information technology industry in the Pearl River Delta is developed, and there are a large number of software and hardware and general infrastructure enterprises. We can focus on the advantageous fields of these regions, give play to the role of pe/vc, and cultivate and incubate more high-quality listing resources. It is suggested to introduce more targeted preferential policies for pe/vc institutions investing in industrial Internet, such as tax relief when exiting; Establish the master fund for industrial Internet development, give greater inclusiveness to the master fund and its invested sub funds in terms of investment years and fault tolerance, change the performance evaluation methods of existing state-owned funds and government guided funds, and promote more resources to invest in start-ups.
        In addition, according to the characteristics of different urban agglomerations, make reasonable planning and layout, avoid repeated construction, provide more accurate industrial policy support, make overall arrangements for relevant special funds, and increase support for collaborative innovation of industrial chain, key core technology research, industrial segmentation clusters, etc. The second is to give a certain policy space in terms of cross-border remittance of the exit earnings of enterprise founders or early investors within a reasonable range. In view of the current situation that many of the founders of enterprises are returned overseas students or overseas Chinese, after the domestic listing of enterprises, policy space is provided for the cross-border remittance of earnings when the founders or early investors withdraw. If it is allowed to transfer a certain amount of withdrawn RMB funds to foreign exchange for a certain period after the listing, the amount of such remitted funds can be linked to the foreign exchange scale created by the enterprises at the initial stage.
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