Shenzhen Stock Exchange to test the waters of securitization

Shenzhen, a leading city for patent applications, will carry out innovative measures to promote intellectual property use, transfer and transactions, local officials said.

As one of China's pilots of IP securitization, Shenzhen in Guangdong province will issue the first product of this kind in the Shenzhen Stock Exchange soon, said Song Yang, deputy director of the IP promotion department of the city's administration of market regulation.

It will be the first financial product of its kind in China, using the accounts receivable of IP-collateralized loans as the underlying assets, which will raise a fund of 1 billion yuan ($142.2 million), Song said.

"We have carefully studied the channels and modes of three products issued in Beijing, Hainan province and Guangzhou of Guangdong province, and learned and analyzed the products and their issuing experience in the United States and Japan," Song said.

"After rounds of discussions and communications with relating financing regulators and banks, we are hopefully contributing a Shenzhen mode to China's IP securitization," he added.

The city, located in the Guangdong-Hong Kong-Macao Greater Bay Area, is also seeking a way to build a transaction center for IP and technological achievements that the whole Bay Area can benefit from.

According to Song, local officials are attempting to break the limits of the domestic traditional transactions to become the first center of its kind in China that can globalize the financing business related to IP rights and technological achievements.

Making full use of the existing market facilities in the Bay Area, the center is designed to focus on IP assets trade and securitization, disclosure of their value and IP-collateralized financing, and promote such transactions' standardization, Song said.

According to official statistics, the international patent application filings via the Patent Cooperation Treaty reached 18,000 in Shenzhen last year, accounting for about one-third of the country's total and ranking first in a row for 15 years.

Chinese telecommunication giant Huawei Technologies, headquartered in Shenzhen, beat other companies in the world to grab the No 1 position with 5,405 PCT applications in 2018.

Shenzhen's spending on research and development is estimated to account for roughly 4.2 percent of the city's GDP last year, close to the world's top level of 4.4 percent made by Israel, said Shan Youliang, deputy director of Shenzhen's market regulation administration.

While patent fillings dropped across the board both in Guangdong and in China, the city maintained double-digit growth in the first three quarters of this year.

"The figures have demonstrated local companies' strong capabilities for IP innovation," Shan said.

"The city government has always valued on IP work, which has long been seen as a driving force behind Shenzhen's innovation and great support to optimize its business environment."