Why did the central government name “gazelles” and “unicorns”?

“It is necessary to strongly and effectively support the development of gazelle enterprises and unicorn enterprises. ”

The Politburo meeting of the Central Committee of the Communist Party of China held on July 30 named and supported gazelles and unicorn companies.01What are gazelles and unicorns?

○ Unicorn companies refer to companies that have been established for less than 10 years, have a valuation of more than US$1 billion, and have not yet been listed.

○ Unicorns and gazelle enterprises are the vane of regional economic activity and the gold content of scientific and technological innovation. In recent years, the number of gazelles and unicorn enterprises in Nanjing has grown explosively, and their contribution to economic growth has increased rapidly, providing a strong leading role for the city to create a strong atmosphere of innovation and entrepreneurship and a good business environment.

○ According to the “China Unicorn Enterprise Research Report 2024” released by Great Wall Strategy Consulting in June 2024, there are 12 unicorn companies on the list in Nanjing, ranking seventh in the country in total. They are: T3 travel, smart travel track; New Kangzhong, automobile service track; China Automobile Chuangzhi, intelligent network league track; SemiDrive Technology, integrated circuit track; Thriving Biotech, innovative drug track; Huakong Chuangwei, artificial intelligence track; Xinhuazhang, integrated circuit track; Lian Shang Literature, Digital Entertainment Track; Zhongneng Alliance, Industrial Internet Track; Aijia Life, Digital Real Estate Track; Fuyou Truck, Smart Logistics Track; Shihe Gene, digital medical track.

02Why are these two types of companies named?

○ The meeting emphasized the “development of new quality productive forces according to local conditions”, and put forward the above requirements when deploying the task of “cultivating and expanding emerging industries and future industries”.

○ Luo Zhiheng, chief economist and dean of the Research Institute of Guangdong Kai Securities, said that the characteristics of new quality productivity are innovation, and the main body of innovation is thousands of small and medium-sized science and technology enterprises, of which unicorns and gazelle enterprises are the backbone.

○ These two types of enterprises have strong innovation ability and great development potential, and have more advantages in breakthrough innovation, and supporting their development is of great significance for the development of new quality productivity.

○ At present, a new round of scientific and technological revolution and industrial transformation is reshaping the global economic structure and industrial map, and new industries, new forms of business and new models are constantly emerging, especially strategic emerging industries and future industries have become a new track for enterprises in various countries to compete.

○ In the context of accelerating the cultivation of new quality productivity, gazelle enterprises and unicorn enterprises led by innovation, driven by high-level talents and high-energy capital, are undoubtedly the key forces to promote economic transformation and industrial upgrading, and play an irreplaceable role in enhancing China’s comprehensive national strength.

○ In recent years, with the steady improvement of the overall strength of China’s scientific and technological innovation, the innovation system has become increasingly complete, and around new technologies, new industries, new formats and new models, China’s gazelle enterprises and unicorn enterprises have sprung up.

○ Zhong Zhengsheng, chief economist of Ping An Securities, believes that the Politburo meeting named “gazelles” and “unicorns” at a high level, and the follow-up policies may strengthen the support for IPO and investment and financing, so as to form a demonstration effect of supporting venture capital, which will help China win the strategic initiative in the increasingly fierce international competition.

○ Focusing on innovation and targeting, gazelles and unicorn enterprises will play a more important role in the process of cultivating new quality productivity.

03How to support “Gazelle” “Unicorn”?

○ The meeting highlighted the importance of “strong and effective”, which is very problem-oriented and practical.

○ In recent years, the number of new unicorn companies in China has declined. According to the 2024 Global Unicorn List released by the Hurun Research Institute, China is in second place with 340, an increase of 24, but 74 new companies were added in 2021.

○ Globally, the decline in the number of new unicorns is not unique to China, but also to United States. Affected by multiple factors such as geopolitics, US dollar interest rate hikes and industrial cycles, unicorns are facing financing challenges.

○ Luo Zhiheng analyzed that there are still blockages in the institutional environment for cultivating patient capital in China, and there is a lack of sufficient financial support for unicorns and gazelle enterprises, such as the docking mechanism between venture capital and innovation and entrepreneurship projects is not smooth. In addition, structural surplus and “involution” vicious competition have reduced the profitability of enterprises.

○ The meeting specifically emphasized the need to strengthen industry self-discipline and prevent “involution” vicious competition, which may help relevant industries get out of the state of “increasing revenue without increasing profits” as soon as possible and promote the stabilization and recovery of corporate profits.

○ Cultivating more “gazelles” and “unicorns” requires more precise support, especially inseparable from venture capital and patient capital. Venture capital is regarded as an incubator booster.

○ In June this year, the General Office of the State Council issued the “Several Policies and Measures to Promote the High-quality Development of Venture Capital”, proposing to improve the policy environment and management system for the whole chain of venture capital “fundraising, investment, management and withdrawal”, and the “17 Venture Capital” will provide “source of living water” for cultivating more “gazelles” and “unicorns”.

○ The Third Plenary Session of the 20th Central Committee of the Communist Party of China proposed to encourage and regulate the development of angel investment, venture capital and private equity investment, give better play to the role of government investment funds, and develop patient capital.

○ Lu Ming, a member of the National Committee of the Chinese People’s Political Consultative Conference (CPPCC) and executive dean of the China Development Research Institute of Shanghai Jiao Tong University, said that the current decline in investment returns is not conducive to the financing of unicorn enterprises. The domestic innovation environment, social environment and policy environment need to be further improved. It is necessary to stabilize the institutional environment and policy expectations, and create a social public opinion atmosphere conducive to innovation. It is necessary to protect the benefits of innovation and the rights and interests of entrepreneurs, and improve the return on investment of innovators. It is crucial to introduce policies based on the rule of law and stabilize the expectations of innovators.