Tech thrives with insurance financing

June 4, 2024
1 min read

TLDR:

  • Insurance funds are boosting technology development in China, particularly in the chip industry.
  • China Life Asset Management Co Ltd set up an 11.8-billion-yuan S fund to invest in emerging industries like integrated circuits.

It has become increasingly difficult to imagine life without digital devices, especially smartphones, with chips becoming smaller in size but larger in importance. However, major technology breakthroughs in the chip industry require significant investment, beyond the reach of ordinary enterprises. This is where insurance capital comes in, providing patient and long-term financing for technology-intensive industries like integrated circuits.

China Life Asset Management Co Ltd has adopted a novel approach of using a secondary fund to invest in emerging industries, such as integrated circuits. By setting up an S fund, the insurer was able to purchase equities from the government-backed Shanghai Integrated Circuit Industry Investment Fund, benefiting companies like Shanghai Advanced Silicon Technology Co Ltd, UNISOC, and Advanced Micro-Fabrication Equipment Inc China.

One of the key advantages of insurance capital is its ability to meet technological companies’ financing needs throughout their entire life cycle. This is demonstrated through investments in equity during the preliminary stages of technology application or industry incubation, shifting to secondary market investments like stocks and mutual funds as the industry or technology matures.

Furthermore, insurance capital plays a vital role in supporting the development of new quality productive forces. By directing capital to modern industries and strategic emerging industries, like advanced manufacturing, green development-related sectors, and technology startups, insurance companies like China Life Group are contributing to the growth of the technology sector in China.

Through the development of specialized insurance policies for technology-savvy companies and the central government’s pilot program to provide insurance compensation for R&D activities, insurance companies are helping to address risks in major sectors or projects, supporting innovation, and protecting investment in the technology industry.

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