(Yicai) Jan. 13 -- China has introduced its first national regulatory framework for government investment funds, aimed at strategically guiding capital flow and preventing resource waste and homogeneous investments between regions.

The framework, released yesterday by the National Development and Reform Commission and three ministries, comprises 14 policy measures focused on where and how government investment funds should invest, and who should manage them.

The issuance of the framework directly addresses longstanding issues troubling China's fund industry, such as mismatches with local resources and industrial foundation, unclear positioning, and serious investment homogenization.

In terms of investment direction, the framework requires government investment funds to support major strategies, key areas, and weak links where market resources cannot be effectively allocated, promote the integration of technological and industrial innovation, and adhere to the principles of early investment, small-scale investment, long-term investment, and investment in hard technology.

The allocation of government funds must comply with major national plans and encouraged industries, and they should not be directed towards restricted, phased-out, or prohibited industries, according to the framework. Moreover, activities such as indirectly increasing local government hidden debt or investing in publicly-traded stocks are strictly forbidden.

The framework also clarifies the difference between national-level funds and local funds.

The former focus on building a modern industrial system, achieving breakthroughs in core technologies, addressing industrial shortcomings, and encouraging collaboration with local funds in cutting-edge technology and supply chains. The latter focus on supporting industrial upgrades, enhancing innovation capabilities, and incubating small and micro private technology enterprises.

The NDRC yesterday also released measures to improve the evaluation and management of government investment funds, aiming to better leverage them to serve national strategies, promote industrial upgrading, and foster innovation and entrepreneurship.

Evaluation results will be directly linked to budget allocation, fund continuation, and performance assessments of management teams, according to the measures. Funds with outstanding performance will receive continued support, while those consistently deviating from their objectives will be rectified.

The core idea of the measures and the framework is to shift government investment funds to quality improvement and targeted efforts from just pursuing scale expansion, ensuring that they genuinely serve China's primary strategic goals and industrial policies, said Liu Guoyan, researcher at the Chinese Academy of Macroeconomic Research's Economic Research Institute.

Editor: Futura Costaglione