Link: Chinese government data: China is unleashing billions in lending to tech startups using intellectual property as collateral, up 57% YoY to ~$58.8B in H1 2024 (Financial Times)

China is rapidly increasing lending to tech start-ups and small companies by using intellectual property (IP) as collateral. IP-pledged financing surged by 57% in the first half of 2024 to Rmb419.9bn ($58.8bn), reflecting a broader push to revive credit growth.

This shift in lending strategy comes amid a property sector slowdown and weakened local government finances. With new renminbi loans to the real economy turning negative in July, Beijing is focusing on boosting innovative small companies through IP-backed loans.

China views IP-backed loans as crucial for the growth of small and micro enterprises. The China National Intellectual Property Administration (CNIPA) has supported this approach, emphasizing the need for financial support during early business stages.

The government’s recognition of IP as legitimate collateral has encouraged smaller banks to step in, particularly as traditional funding sources like stock markets and venture capital have slowed. This strategy, however, carries the risk of non-performing loans due to the difficulty of valuing Chinese IP.

Interest rate subsidies are being offered to banks to incentivize IP financing. This approach is not only intended for high-tech start-ups but is also aiding distressed companies in other sectors.

Despite the risks, the government has implemented regulations to provide leeway for non-performing loans in IP portfolios. This includes exempting bank officers from personal liability, aiming to create a broader auction market for intangible assets in case of defaults. #

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Yoooo, this is a quick note on a link that made me go, WTF? Find all past links here.