The Innovation Credit System (ICS), piloted in 2020, is set for an upgrade and expansion. Originally implemented in national high-tech zones, it will now be put on trial nationwide targeting technology-oriented small and medium-sized enterprises (SMEs) to help them grow and stand out.

This was stated by an ICS guideline (national trial version) released by the general office of the Ministry of Science and Technology (MOST) on August 13.

The ICS quantifies the innovation capabilities of enterprises through a set of innovation credit indicators, converting their innovation capacity into "financial data" that investment institutions can easily understand. This approach will help SMEs secure financial backing.

The ICS has three main indicators. The first is technological innovation, including seven metrics such as R&D expenditure amount, R&D expenditure growth rate, and the turnover of enterprise technology contracts. The second is growth and operation indicators, including six metrics such as high-tech product revenue and net asset profitability. The third includes auxiliary indicators, with five metrics such as the number of fresh graduates hired and the amount of obtained venture capital.

Innovation credit evaluations will be used in areas such as re-lending for technological innovation and special plans for science and technology innovation guarantees. Enterprises with high credits will be highly recommended.

The guideline also provides specific implementation recommendations. For instance, banks and other financial institutions can use innovation credit as a reference for risk assessment and credit enhancement to give technology-oriented SMEs more targeted financial services. Venture capital institutions and capital markets can use enterprise innovation credits as a reference to increase equity investments and listing support for outstanding enterprises.

Management departments are encouraged to support outstanding credit enterprises in applying for national science and technology projects and talent projects, ensuring that high-quality resources are precisely directed towards highly innovative enterprises.

By late 2023, the ICS had been piloted in 133 high-tech zones, covering 25 provincial-level regions. It has played a positive role in guiding fiscal and tax policies, sci-tech resources, talent teams, and financial investment.

ICS participants include the Industrial and Commercial Bank of China, the Agricultural Bank of China, and the Bank of China. They launched special financial products for SMEs, some of which can directly issue unsecured credit loans to technology-oriented SMEs.

This year, the People's Bank of China, together with MOST and other related departments, set up a science and technology innovation re-loan worth 100 billion RMB. On the basis of innovation credit evaluation, about 3,000 enterprises will be selected in two batches and recommended to 21 banks for sci-tech innovation re-loans.