Abstract: In the context of the world's greatest changes unseen in a century, patient capital is not only a tool for allocating financial resources, but also a concentrated expression of national will and strategic determination. Through the expansion and quality improvement of securities companies, the safe layout of overseas assets, the ecological construction of technological innovation, the forging and upgrading of military hard power, and the independent and controllable system breakthroughs in the industrial chain, Chinese enterprises can better leverage their core competitiveness with the help of patient capital.

Keywords: patient capital, capacity expansion and quality improvement, security layout, ecological construction

Patient capital is a long-term investment strategy in which investors are willing to give up short-term quick gains in pursuit of longer-term, more significant returns. It focuses on long-term support and investment for projects or enterprises with sustainable development potential, not only providing funds, but also providing in-depth participation and guidance in strategic planning, operational management and other aspects. The core characteristics of patient capital - cross-cyclical layout capabilities, high risk tolerance, deep empowerment attributes, and strategic orientation, make it valuable in long-term, high-investment, and high-barrier fields such as technology, infrastructure, medical health, and industrial chain upgrades. It can not only promote economic structure optimization and industrial upgrading, support innovative enterprises to cross the "Valley of Death", but also bring more reliable long-term returns to investors, while laying a solid foundation for the long-term stable operation of the capital market.

1. Securities companies expand capacity and improve quality: consolidating the foundation for long-term stability of the capital market

Patient Capital's "patience" stems from its strong capital strength, which allows it to withstand short-term market fluctuations and carry out cross-cyclical strategic layouts. After years of development, China's securities industry has accumulated enough capital to support its role as a long-term investor. The expansion and quality improvement of securities companies is essentially a carrier for the large-scale operation of patient capital: on the one hand, sufficient capital reserves allow securities companies to practice the long-term investment logic of patient capital, carry out long-term holdings and in-depth empowerment of high-quality enterprises and key industries; on the other hand, it can promote the quality and upgrading of securities companies in research capabilities, risk management and control, post-investment services, etc., and further enhance the allocation efficiency and value creation capabilities of patient capital. According to data from the Securities Association of China, as of 2024, the total assets of 150 securities companies will be 12.93 trillion yuan, net assets will be 3.13 trillion yuan, net capital will be 2.31 trillion yuan, the balance of customer transaction settlement funds (including credit transaction funds) will be 2.58 trillion yuan, and the total principal of funds under entrusted management will be 9.17 trillion yuan. This trillion-level asset volume provides a solid material prerequisite for securities companies to engage in substantial long-term equity investment and value investment.

Specifically, in 2024, the securities industry will achieve annual operating income of 451.169 billion yuan (a year-on-year increase of 11.15%) and a net profit of 167.257 billion yuan (a year-on-year increase of 21.35%). The industry's average return on equity will be 5.5% in 2024, a year-on-year increase of 0.7%. From the perspective of business structure, in 2024, the proportion of self-operated business, brokerage business, net interest income, investment banking business, asset management business and other business income in operating income will be 38.6%, 28.4%, 11.1%, 7.8% and 5.3% respectively. The business structure remains stable. The sustained and stable profitability not only enhances the industry's risk resistance, but more importantly, creates conditions for its endogenous accumulation and reinvestment of capital, thus continuously growing its capital pool as a patient capital.

(1) Triple strategic value of expansion and optimization of securities companies

First, stabilize macro expectations and the market: Securities companies play an important role as market makers and intermediaries in the capital market, and have counter-cyclical adjustment functions. Patient capital does not pursue short-term market hot spots, but focuses on the long-term value of enterprises. Therefore, during periods of market volatility, securities companies can provide continuous financing support to enterprises through underwriting bonds, stock refinancing, and promoting mergers and acquisitions and reorganizations based on the logic of patient capital, effectively smoothing economic fluctuations and providing stable expected support for the capital market. In recent years, in the face of slowing global economic growth and intensified financial market volatility, some large securities companies have still maintained steady operations, playing the role of "ballast" in the capital market and stabilizing investor confidence.

Second, strengthen social cohesion: securities companies use wealth management, inclusive financial services and investment education activities to guide residents’ funds into patient capital. Through professional services, residents can understand the logic of long-term value investment, convert short-term savings into long-term investable funds, improve residents' financial management capabilities and sense of gain, and also enhance the public's understanding and trust in the capital market. This confidence is not only reflected at the level of individual investors, but also in the long-term dependence of enterprises and institutions on the capital market, thus solidifying the social foundation for the healthy operation of the capital market.

Third, serve the national strategic layout: As an important intermediary and resource allocation platform in the capital market, securities companies guide the flow of social capital to key national strategic areas such as technological innovation, green and low carbon through underwriting and issuance, research services, direct investment business, etc. The core goal of patient capital performance is not short-term financial returns, but to meet the country's long-term development needs and promote the implementation of national strategies in the capital market.

(2) Three major focuses on making securities companies bigger and stronger

Scientifically plan the target system and strengthen capital and governance guarantees. According to the strategic deployment of building a national financial power, securities companies should build a dynamic growth target system to match their asset size and business capabilities with the development stage of the capital market. As of June 30, 2025, the total assets of my country's securities industry were 13.46 trillion yuan, accounting for approximately 10% of GDP. To improve the ability to serve the real economy, it is necessary to establish a modern corporate governance structure based on internal and external joint supervision, with strong capital strength as the core, clarify the coordinated development path of business sectors such as brokerage, investment banking, and asset management, and ensure that the company's strategy and the national strategy resonate at the same frequency.

Second, innovate the capital replenishment mechanism and expand long-term funding sources. The operation of patient capital requires a stable and long-term supply of funds, and it is far from enough to rely solely on the retention of endogenous profits of securities companies. On the basis of consolidating the retention of endogenous profits, we should deeply tap the potential of external financing and consolidate the capital base. We can learn from the model of continuous financing development through the capital market of international investment banks such as Goldman Sachs and Morgan Stanley. Under the existing regulatory framework, we can flexibly use various tools such as rights issues, additional issuances, issuance of subordinated debt and income certificates to replenish capital. In the face of increasingly fierce competition and the expansion needs of capital-heavy businesses, internal financing alone is far from enough. At the same time, we should actively strive for strategic shares from long-term institutional investors such as insurance funds, bank wealth management subsidiaries, and pension funds, optimize the shareholder structure, and form a new capital supplement pattern of "market-oriented financing strategic investor collaboration".

Third, deepen the reform of business models, improve investment research and internationalization capabilities, and accelerate the transformation of securities companies from channel-driven to professional capability-driven. Optimize the business structure, change the over-reliance on traditional brokerage business, and shift the focus of business to high value-added areas such as investment banking, asset management, and wealth management. The proportion of income from professional services such as asset management and investment banking should be steadily increased, focusing on serving the financing and development needs of strategic emerging industries such as the digital economy and high-end manufacturing; the performance appraisal mechanism should be improved and an investment performance and talent evaluation system with "rolling rate of return over three years" as the core should be established, especially in self-operated and asset management businesses, to avoid To avoid short-term and transactional tendencies, cultivate a long-term value investment culture; to accelerate international layout, we can learn from the globalization experience of international investment banks, and under the premise of controllable risks, improve cross-border service capabilities by setting up branches in Hong Kong, Singapore, New York, and other places in the United States, and effectively diversify the cyclical risks of a single market.

Through these measures, securities companies, as the core carriers of patient capital, will continue to grow bigger and stronger, providing more solid long-term financial support and stable foundation for China's capital market.

2. Safety of overseas asset allocation: adding risk prevention confidence to the capital market

Against the backdrop of profound adjustments to the global economic landscape, conducting overseas asset allocation business has become a core strategy for securities companies to improve their wealth management service capabilities and enhance their competitiveness. For securities companies, the empowerment of patient capital allows them to have more strategic focus in overseas asset allocation. Different from short-term speculative overseas investments, overseas asset allocation based on the logic of patient capital takes long-term stable returns and risk diversification as the core goals. Through cross-regional and cross-cyclical asset portfolio layout, it reduces the impact of single market fluctuations on the domestic capital market and adds risk prevention confidence to the capital market.

As of the end of June 2025, according to data from the State Administration of Foreign Exchange, my country's qualified domestic institutional investors (QDII) investment quota has reached 170.869 billion US dollars, of which securities companies and fund companies are the main participants. It is expected that this quota will continue to rise in the future. Behind this trend is the implementation of the concept of patient capital in overseas asset allocation - providing customers with robust global asset allocation services, which can not only share the dividends of global economic growth, but also provide key support for the stability of the company's business.

(1) Three major strategic values ​​of overseas asset allocation

For securities companies, global asset allocation has three core business values. The first is to capture global cutting-edge dividends and improve product returns. By establishing fund products and asset management plans to invest in overseas markets, and accurately deploying global high-tech enterprises, we can share the dividends of the global technological revolution in industrial chains such as artificial intelligence, biomedicine and new energy with domestic customers, and achieve long-term asset appreciation. At the same time, it forces the company's investment research system to integrate with international standards and enhance its value discovery capabilities on a global scale. The second is to achieve diversified allocation and enhance the resilience of the customer portfolio. There are differences between the A-share market and mature markets such as Europe and the United States in terms of economic cycles and industry rotations, and they have natural complementary advantages. One of the core features of Patient Capital is to travel through cycles. By guiding customers to diversify their assets into different countries and different types of assets around the world (such as US stocks, Hong Kong stocks, overseas bonds, REITs, etc.), it helps to hedge the systemic risks of a single market and smooth portfolio fluctuations. When the domestic market adjusts, the income from overseas assets can provide a valuable buffer, which has become a "rigorous need" for high-net-worth clients' asset allocation. The third is to build a global service network and enhance the brand's strategic position. Establishing branches in international financial centers (such as Hong Kong and Singapore) and obtaining local business licenses are not only the basis for serving customers to "go out" and "bring in", but are also the company's own strategic assets. This global layout can help companies maintain smooth information and business continuity in a complex international environment. It is a key step for securities companies to move from local securities firms to international investment banks, bringing strategic initiative to their long-term development.

(2) Three major measures for overseas asset security and risk hedging

First, strengthen the internal top-level design and build a collaborative risk control system: The long cycle and cross-regional characteristics of patient capital make the country risks, market risks, and exchange rate risks it faces more complex, so a collaborative governance mechanism with multi-departmental linkage is needed. Under the leadership of the board of directors and operating management, a collaborative governance mechanism has been established involving the international business department, risk management department, compliance and legal department, research department and other departments. Formulate clear "Overseas Investment Business Management Measures" to clarify the assessment standards, approval procedures and contingency plans for country risks, market risks, exchange rate risks, etc. For key investment areas, strict negative lists for investment access and post-investment management rules will be established to ensure that business development and risk management and control go hand in hand.

Secondly, improve quantitative risk prevention and control and build a solid bottom line for business security: introduce a multi-dimensional country risk assessment model covering politics, economy, law, etc., and establish a quantitative investment portfolio risk early warning system based on indicators such as market volatility and liquidity. Regularly conduct stress testing and scenario analysis on global asset allocation portfolios, and use financial technology to monitor changes in policies and regulations in investment locations in real time. Implement refined management of investment targets for self-operation and asset management to ensure clear and controllable risk exposures.

In addition, we innovate the cross-border business model and optimize the global business layout: actively explore the two-wheel drive model of "product exporting" and "customer introduction". On the one hand, it vigorously develops QDII, cross-border income swap and other businesses to provide domestic customers with a wealth of global asset allocation tools; on the other hand, it relies on QFII, Shanghai-Shenzhen-Hong Kong Stock Connect and other mechanisms to improve its service capabilities for international investors and attract global capital to allocate Chinese assets. In terms of business layout, while consolidating its position as a bridgehead in the Hong Kong market, it can strategically explore emerging markets in the Belt and Road Initiative such as Southeast Asia and the Middle East to cultivate new growth points. At the same time, we will actively develop RMB-denominated cross-border investment and financing products, build a closed business loop, and systematically reduce reliance on a single foreign exchange settlement system.

By improving corporate governance, strengthening risk management and control, and innovating business models, securities companies' global asset allocation business will create long-term value for customers and build a solid "moat" for the company's own steady development and internationalization process.

3. Increase investment in scientific and technological innovation: Cultivate new momentum for the capital market

Scientific and technological innovation is a key engine to promote high-quality economic development and enhance the country's core competitiveness. Today, as global technological competition shifts from single-point breakthroughs to systemic games, increasing investment in technological innovation plays a fundamental role in the long-term and healthy development of the capital market. As an important operating entity of patient capital, securities companies inject patient capital into the field of technological innovation to promote a virtuous cycle of "capital empowers innovation and innovation feeds back the market". Through its long-term empowerment, the core value of technological innovation can be fully released, thereby promoting the optimization and upgrading of the industrial structure of the capital market and achieving healthy development.

(1) The triple role of technological innovation in driving capital market development

First, the driving force for economic transformation: new generation information technologies such as industrial robots, artificial intelligence, and the Internet of Things have significantly improved production efficiency by replacing repetitive labor and optimizing production processes; big data and new energy technologies help reduce costs, increase efficiency, and promote green growth. Technological innovation has created a large number of emerging industries and emerging enterprises, providing the capital market with new investment targets and sustainable growth momentum.

Second, the cornerstone of international voice: in international competition, technical standards and voice are increasingly important. Independent technological innovation provides an important bargaining chip for China to participate in global governance, enables domestic technology-based enterprises to occupy a dominant position in the international market, and further enriches capital market sectors and investment opportunities.

(2) Three major ways for patient capital to empower technological innovation

Establish a technological innovation investment fund to incubate hard technologies in depth: build an "investment banking investment" linkage service system covering the entire life cycle of enterprises. Through the establishment of private equity investment funds (PE/VC), we will make direct investments in early-stage and growth-stage enterprises in strategic emerging industries such as integrated circuits, artificial intelligence, and biomedicine. Through market-oriented and professional "raising, investment, management and exit" operations, securities companies can form long-term interest binding and in-depth empowerment with invested enterprises.

Give full play to the professional advantages of investment banks and make good use of the "main position" of the Science and Technology Innovation Board: build the Science and Technology Innovation Board into a core platform that serves the listing financing and value discovery of hard technology companies. From the opening of the market in 2019 to the end of August 2024, the Science and Technology Innovation Board has accepted applications for issuance and listing from more than 1,000 companies, and accepted 573 listed companies. The total initial financing amount has reached 910.789 billion yuan, and the total market value is nearly 5 trillion yuan, making it the preferred place for hard technology companies to go public. The investment banking departments of securities companies should give full play to their core capabilities in corporate value discovery, issuance pricing, and compliance guidance, and truly build the Science and Technology Innovation Board into a "test field" that supports technological innovation and a main platform for value realization.

Innovate financial products and tools and build diversified investment and financing mechanisms: Promote the bond market and financial derivatives to better serve technological innovation. Securities companies should actively serve as the main underwriters of technological innovation corporate bonds (technological innovation bonds) to provide efficient and low-cost debt financing channels for “specialized, innovative” and technological innovation enterprises. In view of the asset-light and high-risk characteristics of scientific and technological innovation enterprises, securities companies can create diversified financial instruments such as intellectual property securitization, merger and acquisition funds, convertible bonds, and income certificates, and introduce credit protection tools to disperse risks and build an all-round, multi-level scientific and technological financial service system covering stocks, bonds, and derivatives.

By increasing professional investment, leveraging the advantages of investment banks, and innovating financial instruments, securities companies will effectively empower industrial innovation, cultivate a group of globally competitive technology leaders, and inject strong new momentum into the long-term prosperity of the capital market.

4. Breaking through the bottleneck of the industrial chain: enhancing the momentum of sustainable development of the capital market

In the current competitive environment between major powers, there are technical bottlenecks and shortcomings in my country's industrial and supply chains, which have become hidden concerns that restrict the healthy development of the capital market. The main problems include: high technical barriers to basic materials, core components and key processes, and long-term dependence on imports in related fields; low efficiency in the transformation of scientific and technological achievements and long marketization cycles; limited financing channels for innovative entities represented by "specialized, specialized and innovative" small and medium-sized enterprises, making it difficult to afford long-term R&D investment. These are highly consistent with the core attributes of patient capital. These factors have affected the effective link between the innovation chain and the industrial chain, and restricted the capital market's cultivation of high-tech enterprises. In this context, as a long-term strategic fund, patient capital can withstand the high risks and long cycles of technological breakthroughs. Through policy guidance, concentrated investment and ecological co-construction, it promotes the independent control of the industrial chain, thereby cultivating more high-quality enterprises for the capital market. Patient capital has become an important driving force in helping the industry chain to be autonomous and controllable, and its key measures are mainly reflected in three aspects.

First, accelerate the implementation of innovation-driven development strategy and improve investment tolerance through differentiated assessment and fault-tolerance policies. For example, Anhui Province has set a maximum investment loss tolerance rate of 80% for government guidance funds and encourages “early investment in small and hard technologies.” Hefei Science and Technology Innovation Financial Reform Pilot Zone covers the entire process of transformation of scientific and technological achievements through angel funds and industrial funds, providing financial support for science and technology innovation enterprises at different stages. Similar mechanisms can help attract patient capital to increase investment in early-stage hard technology.

Secondly, increase long-term equity investment. The integrated circuit full-chain layout project led by the State Development and Investment Group invests in supporting leading companies such as Cambrian to accelerate the development of EDA tools, key components of lithography machines and other links. In terms of industrial cluster layout, Hefei Construction Investment Group has promoted the formation of trillion-level industrial clusters such as new displays and new energy vehicles through a closed-loop model of "investment-landing-equity exit-reinvestment". Patient Capital strengthens these breakthroughs through long-term equity investment, which will form a coordinated development of the upstream and downstream of the industrial chain.

In addition, a collaborative ecosystem of industry, academia, research and application will be built. Support leading enterprises to take the lead in forming cross-field innovation consortiums and promote the organic integration of industry, academia, research and application. Build a collaborative innovation platform, grant the consortium the right to make decisions on technical routes and the right to distribute results, establish an intellectual property sharing pool and risk sharing mechanism, and form an open innovation ecosystem. The government can participate in the formulation of consortium incentive policies to guide patient capital to continue to increase support for innovative entities and achieve a deep integration of innovation resources and capital.

Through policy innovation, concentrated investment and ecological co-construction, Patient Capital will enhance the resilience of the industrial chain, cultivate more independent and controllable high-quality enterprises and projects for the capital market, and promote high-quality economic development.

To sum up, the world is currently undergoing major changes unseen in a century. As a strategic long-term fund, patient capital is of great significance in promoting the healthy development of China’s capital market. By expanding the capacity and quality of securities companies and professional investment institutions, optimizing the layout of overseas assets, increasing investment in science and technology and military industry, and breaking through key technologies in the industrial chain, and improving operational management levels by cultivating professional investment institutions and talents, Patient Capital can accurately serve national strategies and capital market construction, play a key role in the sustained and healthy development of the capital market, and provide solid support for the realization of the great rejuvenation of the Chinese nation. (Author: Peng Jingtao, Lin Rongxiong, Securities Research Institute, SDIC Securities, SDIC Industrial Research Institute)

Risk warning: Funds have risks, so investment needs to be cautious.

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