context: Continued actoin to save capital markets reveal the importance they hold for Beijing’s scitech ambitions. Recent measures from the financial regulator to guide more bank capital into investment funds, coupled with Guangdong’s own set of Opinions meant to bolster the sector and the Premier’s words, indicate more policy experimentation and support for funding of innovative firms are likely this year.
Premier Li Qiang’s 李强 2024 government work report mentioned ‘encouraging the development of venture investment, equity investment and improving the function of industry funds’, heartening to many industry insiders, reports 21st Century Business Herald.
Beijing first mentioned the phrase during December 2023’s Central Economic Work Conference, with its reaffirmation during the Two Sessions indicating more policies are coming this year to nurture the industry’s development, including injecting more long-term capital into funds, an unnamed large domestic fund manager told the publication.
Combined with specific legislation regulating the industry passed last year, the mention has industry insiders expecting further support
- more easing in
- VC (venture capital) fund investment parameters
- investment strategies
- leverage use
- investment periods
- facilitation of
- fund raising
- investment
- management
- exit
- guide more S-funds (secondary funds)
- develop secondary equity markets
- tax relief
Industry funds, whose funding mostly comes from government guidance funds and other state capital, have short-term value maintenance or growth requirements, limiting their use in long-term risk investing, explains the fund manager. There is hope this will be adjusted to allow them to more easily invest in the new technologies, which will require long-term investments with more risk tolerance.
Meanwhile, delegates to the Two Sessions have been proposing their own solutions to the industry’s problems
- Beijing should lower tax rates on VC limited partners and managers, contends He Jie 何杰 Shenzhen People’s Congress deputy secretary general
- total tax currently double US rate
- more long-term capital like pensions and insurers must be guided to increase equity investments, believes Jin Li 金李 Southern University of Science and Technology vice dean
- raise risk investment limits
- more organised investment
- avoid individual projects
- develop S-funds
- opening more exit paths is necessary, explains Zhang Yichen 张懿宸 CITIC Capital chairperson
- increase proportion of shares foreign capital can hold
- allow M&A fund parent companies to list on domestic markets
- increase M&A parametres
- change evaluation mechanism to emphasise future value