(Yicai) Aug. 2 -- Shanghai’s Pudong New Area is rolling out a new financial service mechanism, called Innovation Loans, that links venture capital, banks and businesses, and will provide over CNY40 billion (USD5.5 billion) in credit to high-tech startups in the district to drive innovation.

Pudong Venture Capital Group, a state-owned angel investor, is linking arms with 10 lenders to provide full financial support for local science and technology companies in different industries and at different stages of development. The projects cover Shanghai's key innovative industries such as integrated circuits, biomedicine, and artificial intelligence.

Banks participating in the Innovation Loan scheme, representatives from companies that have secured such funding and their ecosystem partners signed strategic co-operation deals as well as agreements on the projects where the loans will be used at the launch yesterday.

Banks participating in the scheme had already extended more than CNY3 billion of loans to local high-tech startups before the program was officially launched yesterday, said Wen Xinchun, executive director of Pudong Venture Capital. This includes CNY1.8 billion since the beginning of the year. All the loan recipients were recommended by Pudong Venture Capital to the banks.

Industrial and Commercial Bank of China’s Shanghai branch, which is co-operating in the scheme, will provide CNY10 billion in financing for science and tech companies at an interest rate 85 basis points lower than the benchmark loan prime rate, which is probably the lowest interest rate currently available on the market, Deputy Governor Wang Rui said.

Bank of Communication’s Shanghai branch has approved all seven loan applications recommended by Pudong Venture Capital this year, Governor Tu Hong said.

A major advantage of the Innovation Loan is that, compared to other means of fundraising, the application process is efficient and streamlined, allowing tech startups to focus more on research and development, said Huang Yuning, executive vice president of Unisoc Technologies, a chip designer and one of the companies that has obtained the loan.

Innovation Loans allow for a smoother, more efficient and more solid financing channel for high-tech startups compared to what existed before, said Guo Min, founder of biotech company Kangma Healthcode.

Pudong Venture Capital runs a variety of funds that it can provide different forms of financing including angel investment, industrial investment and strategic investment to high-tech startups at different stages of their life cycle.

Editors: Tang Shihua, Kim Taylor