(Yicai) Nov. 28 -- China has this month approved three commercial lenders, including China Merchants Bank, to open asset investment companies, making them the first AICs to be green lighted in eight years and expanding the equity investment model beyond state-owned banks.

The Financial Regulatory Administration has given permission for business to commence at the new asset investment arms of China Merchants Bank and Citic Bank, the pair announced on Nov. 23. Industrial Bank’s AIC unit opened earlier this month.

The three new units share a similar approach to investment, according to analysts. Each embraces an “equity + debt” model, combining stake purchases with lending, to enable deeper and more flexible support for businesses. They will also focus on tech innovators, green and low-carbon projects, and smaller and niche technology firms.

They have made financing for science and technology their core strategies, and the banks behind them have solid experience in combining investment and commercial banking operations, said Yang Haiping, researcher at the Shanghai Academy of Finance and Law.

The first banking AICs were opened in 2017 by five big state-owned lenders: Agricultural Bank of China, Bank of China, Bank of Communications, China Construction Bank, and Industrial and Commercial Bank of China. Postal Savings Bank of China, the only major state-owned bank without an AIC, was given the go-ahead to prepare last month.

More commercial lenders are likely to get approval to set up AIC units, according to Lou Feipeng, a researcher at Postal Savings Bank.

The “equity + debt” model will not only enable commercial banks to earn investment returns, but will also transform their role to value-creating partners from mere capital providers, said Xue Hongyan, special researcher at Suzhou Commercial Bank.

“Tech companies are generally asset-light and high-growth, and lack adequate collateral,” an executive at a joint-stock bank told Yicai. “Conventional credit models are constrained by collateral requirements, making it hard for these companies to get the financial support matching their development stage.”

As an equity investment arm within the banking system, an AIC offers a regulated and compliant channel for bank capital to flow into tech innovators, the person said. This represents a shift from restricted or constrained investment to feasible investment, enabling lenders to reap returns as firms grow and better match risks with benefits.

Editors: Tang Shihua, Futura Costaglione